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Italian cabinet passes new budget law
Italian cabinet passes new budget law

Rome, Nov 22 (TIWN) The Italian cabinet passed the new budget law on Tuesday, planning measures worth some $35.8 billion for 2023.

The continued energy crisis, triggered by Russia's invasion of Ukraine, means Prime Minister Giorgia Meloni and her allies will not be able to make good on their more extravagant electoral campaign promises, including swingeing tax cuts.

"We won't be able to do everything, all at once. Past attempts to do that have ended in disaster," Industry Minister Adolfo Urso told La Stampa newspaper on Sunday.

Meloni has already said that roughly two thirds of the additional spending power would be used to help companies and households survive record-high gas and electricity bills. This comes on top of some 75 billion euros splashed out in 2022 to tackle surging energy prices.

The cabinet this month lifted the 2023 deficit target to 4.5 per cent of gross domestic product from a 3.4 per cent forecast made by the previous government of Mario Draghi. But ministers say they will be fiscally prudent, and avoid the budget errors that unseated Britain's former prime minister Liz Truss.

As a result, campaign pledges by the far-right League party for a generous reform of the pension system have been delayed, and while the budget will include a reduction of the tax burden on labour, large scale income tax cuts have been ruled out.

In an effort to help families face up to eye-watering inflation, which under the EU-harmonised index hit 12.6 per cent year-on-year in October, the cabinet is considering eliminating sales tax on core essentials such as milk and bread.

Additional borrowing will pay for some of the spending pledges, but around 3 billion euros in new revenues are expected to be raised via a windfall tax on profits of energy companies that have benefited from sky-high oil and gas prices.

Looking to carve out savings, Meloni is also expected to start rolling back a "citizens' wage" poverty relief scheme.

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