Recommendation for a COUNCIL RECOMMENDATION on the 2022 National Reform Programme of Italy and delivering a Council opinion on the 2022 Stability Programme of Italy
Date: 2022-05-23
Institutions: European Commission, Secretariat-General
Subjects: Italy, economic policy, economic recovery, economic reform, energy policy, public finance, stability pact, stability programme, sustainable mobility

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   EUROPEAN COMMISSION  Brussels, 23.5.2022  COM(2022) 616 final  Recommendation for a COUNCIL RECOMMENDATION on the 2022 National Reform Programme of Italy and delivering a Council opinion on the 2022 Stability Programme of Italy {SWD(2022) 616 final} - {SWD(2022) 640 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2022 National Reform Programme of Italy and delivering a Council opinion on 
the 2022 Stability Programme of Italy 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Articles 121(2) and 148(4) thereof, 

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of 
the  surveillance  of  budgetary  positions  and  the  surveillance  and  coordination  of  economic 
policies1 , and in particular Article 5(2) thereof, 

Having  regard  to  Regulation  (EU)  No  1176/2011  of  the  European  Parliament  and  of  the 
Council  of  16  November  2011  on  the  prevention  and  correction  of  macroeconomic 
imbalances2 , and in particular Article 6(1) thereof, 

Having regard to the recommendation of the European Commission, 

Having regard to the resolutions of the European Parliament, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

Having regard to the opinion of the Economic and Financial Committee, 

Having regard to the opinion of the Social Protection Committee, 

Having regard to the opinion of the Economic Policy Committee, 

Whereas: 

(1) 

Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council3,  which 
established  the  Recovery  and  Resilience  Facility,  entered  into  force  on  19  February 
2021.  The  Recovery  and  Resilience  Facility  provides  financial  support  for  the 
implementation of reforms and investment, entailing a fiscal impulse financed by the 
Union.  It  contributes  to  the  economic  recovery  and  to  the  implementation  of 
sustainable and growth-enhancing reforms and investment, in particular to promote the 
green and digital transition, while strengthening the resilience and potential growth of 
the Member States’ economies. It also helps strengthen sustainable public finances and 
boost growth and job creation in the medium and long term. The maximum financial 
contribution  per  Member  State  under  the  Recovery  and  Resilience  Facility  [was] 
updated on [XX] June 2022, in line with Article 11(2) of Regulation (EU) 2021/241.   

(2) 

On  24  November  2021,  the  Commission  adopted  the  Annual  Sustainable  Growth 
Survey,  marking  the  start  of  the  2022  European  Semester  for  economic  policy 

1 
2 
3 

OJ L 209, 2.8.1997, p. 1. 
OJ L 306, 23.11.2011, p. 25. 
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council  of  12  February  2021 
establishing the Recovery and Resilience Facility (OJ L 57, 18.2.2021, p. 17). 

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coordination.  It  took  due  account  of  the  reaffirmed  joint  commitment  of  the  Porto 
Social Summit of May 2021 to further implement the European Pillar of Social Rights, 
proclaimed  by  the  European  Parliament,  the  Council  and  the  Commission  on  17 
November  2017.  The  European  Council  endorsed  the  priorities  of  the  2022  Annual 
Sustainable Growth Survey on 25 March 2022. On 24 November 2021, on the basis of 
Regulation  (EU)  No  1176/2011,  the  Commission  also  adopted  the  Alert  Mechanism 
Report, in which it identified Italy as one of the Member States for which an in-depth 
review4  would  be  needed.  On  the  same  date,  the  Commission  also  adopted  a 
recommendation  for  a  Council  recommendation  on  the  economic  policy  of  the  euro 
area, which was adopted on 5 April 2022 by the Council, as well as the proposal  for 
the 2022 Joint Employment Report analysing the implementation of the Employment 
Guidelines  and  the  principles  of  the  European  Pillar  of  Social  Rights,  which  was 
adopted by the Council on 14 March 2022. 

Russia’s  invasion  of  Ukraine,  in  the  wake  of  the  global  pandemic,  has  significantly 
altered the geopolitical and economic context. The impact of the invasion on Member 
States’ economies has been felt for example through higher energy and food prices and 
weaker  growth  prospects.  The  higher  energy  prices  weigh  particularly  on  the  most 
vulnerable households experiencing risk of energy poverty. The EU is also seeing an 
unprecedented inflow of people fleeing Ukraine. In this context, on 4 March 2022, the 
Temporary  Protection  Directive  was  triggered5  for  the  first  time,  granting  displaced 
persons from Ukraine the right to legally stay in the EU, as well as access to education 
and training, labour market, healthcare, housing and social welfare. 

Taking  account  of  the  rapidly  changing  economic  and  geopolitical  situation,  the 
European Semester resumes its broad economic and employment policy coordination 
in 2022, while evolving in line with the implementation requirements of the Recovery 
and  Resilience  Facility,  as  outlined  in  the  2022  Annual  Sustainable  Growth  Survey. 
The  implementation  of  the  adopted  recovery  and  resilience  plans  is  essential  for  the 
delivery of the policy priorities under the European Semester, as the plans address all 
or a significant subset of the relevant country-specific recommendations issued in the 
2019  and  2020  Semester  cycles.  The  2019  and  2020  country-specific 
recommendations  remain  equally  relevant  also  for  recovery  and  resilience  plans 
revised, updated, or amended in accordance with Articles 14, 18 and 21 of Regulation 
(EU) 2021/241, in addition to any country-specific recommendations issued up to the 
date of submission of the modified plan.  
The General Escape Clause has been active since March 20206. In its Communication 
of  3  March  20217,  the  Commission  set  out  its  view  that  the  decision  on  the 
deactivation or continued application of the general escape clause should be taken as 
an overall assessment of the state of the economy, with the level of economic activity 
in the EU or euro area compared to pre-crisis levels (end-2019) as a key quantitative 

Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 
on the prevention and correction of macroeconomic imbalances, OJ L 306, 23.11.2011, p. 25. 
Council Implementing Decision (EU) 2022/382 of 4 March 2022 establishing the existence of a mass 
influx of displaced persons from Ukraine within the meaning of Article 5 of Directive 2001/55/EC, and 
having the effect of introducing temporary protection, OJ L 71, 4.3.2022, p. 1 
Communication from the Commission to the Council on the activation of the general escape clause of 
the Stability and Growth Pact, Brussels, 20.3.2020, COM(2020) 123 final. 
Communication  from  the  Commission  to  the  Council  on  one  year  since  the  outbreak  of  COVID-19: 
fiscal policy response, Brussels, 3.3.2021, COM(2021) 105 final. 

(3) 

(4) 

(5) 

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(6) 

(7) 

criterion. Heightened uncertainty and strong downside risks to  the economic outlook 
in  the  context  of  war  in  Europe,  unprecedented  energy  price  hikes  and  continued 
supply  chain  disturbances  warrant  the  extension  of  the  general  escape  clause  of  the 
Stability and Growth Pact through 2023. 

Following the approach in the Council opinion of 18 June 2021 on the 2021 Stability 
Programme,  the  fiscal  stance  is  currently  best  measured  as  the  change  in  primary 
expenditure  (net  of  discretionary  revenue  measures),  excluding  COVID-19  crisis-
related  temporary  emergency  measures  but  including  expenditure  financed  by  non-
repayable  support  (grants)  from  the  Recovery  and  Resilience  Facility  and  other  EU 
funds,  relative  to  medium-term  potential  growth8.  Going  beyond  the  overall  fiscal 
stance, in order to assess whether national fiscal policy is prudent and its composition 
is conducive to a sustainable recovery consistent with the green and digital transitions, 
attention  is  also  paid  to  the  evolution  of  nationally  financed9  primary  current 
expenditure  (net  of  discretionary  revenue  measures  and  excluding  COVID-19  crisis-
related temporary emergency measures) and investment. 

On  2  March  2022,  the  Commission  adopted  a  Communication  providing  broad 
guidance  for  fiscal  policy  in  2023,  aiming  at  supporting  the  preparation  of  Member 
States’  Stability  and  Convergence  Programmes  and  thereby  strengthening  policy 
coordination10. The Commission noted that, based on the macroeconomic outlook of 
the  2022  winter  forecast,  transitioning  from  an  aggregate  supportive  fiscal  stance  in 
2020-2022  to  a  broadly  neutral  aggregate  fiscal  stance  would  appear  appropriate  in 
2023,  while  standing  ready  to  react  to  the  evolving  economic  situation.  The 
Commission announced that the fiscal recommendations for 2023 should continue to 
differentiate  across  Member  States  and  take  into  account  possible  cross-country 
spillovers. The Commission invited the Member States to reflect the guidance in their 
Stability  and  Convergence  Programmes.  The  Commission  committed  to  closely 
monitor  the  economic  developments  and  adjust  its  policy  guidance  as  needed  and  at 
the latest in its Semester spring package of late May 2022. 

(8)  With  respect  to  the  fiscal  guidance  provided  on  2  March  2022,  the  fiscal 
recommendations  for  2023  take  into  account  the  worsened  economic  outlook,  the 
heightened uncertainty and further downside risks, and the higher inflation compared 
to the winter forecast. Against these considerations, the fiscal response has to expand 
public investment for the green and digital transition and energy security, and sustain 
the purchasing power of the most vulnerable households so as to cushion the impact of 
the energy price hike and help limit inflationary pressures from second round effects 
via targeted and temporary measures; fiscal policy has to remain agile so as to adjust 
to the rapidly evolving circumstances, and be differentiated across countries depending 
on their fiscal and economic situation, including as regards the exposure to the crisis 
and the inflow of displaced persons from Ukraine.  

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The  estimates  on  the  fiscal  stance  and  its  components  in  this  recommendation  are  Commission 
estimates  based  on  the  assumptions  underlying  the  Commission  2022  spring  forecast.  The 
Commission’s estimates of medium-term potential growth do not include the positive impact of reforms 
that are part of the Recovery and Resilience Plan and that can boost potential growth.  

Not financed by grants from the Recovery and Resilience Facility and other EU funds. 

Communication  from  the  Commission  to  the  Council:  Fiscal  policy  guidance  for  2023,  Brussels, 
2.3.2022, COM(2022) 85 final. 

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(9) 

On  30  April  2021,  Italy  submitted  its  national  recovery  and  resilience  plan  to  the 
Commission, in accordance with Article 18(1) of Regulation (EU) 2021/241. Pursuant 
to  Article  19  of  Regulation  (EU)  2021/241,  the  Commission  assessed  the  relevance, 
effectiveness,  efficiency  and  coherence  of  the  recovery  and  resilience  plan,  in 
accordance with the assessment guidelines of Annex V to that Regulation. On 13 July 
2021,  the  Council  adopted  its  Decision  on  the  approval  of  the  assessment  of  the 
recovery and resilience plan for Italy11. The release of instalments is conditional on a 
decision  by  the  Commission,  taken  in  accordance  with  Article  24(5)  of  Regulation 
(EU) 2021/241, that Italy has satisfactorily fulfilled the relevant milestones and targets 
set out in the Council Implementing Decision. Satisfactory fulfilment presupposes that 
the achievement of preceding milestones and targets has not been reversed. 

(10)  On  27  April  2022,  Italy  submitted  its  2022  National  Reform  Programme  and,  on  27 
April  2022,  its  2022  Stability  Programme,  in  line  with  the  deadline  established  in 
Article 4 of Regulation  (EC) No 1466/97. To take account of their interlinkages, the 
two  programmes  have  been  assessed  together.  In  accordance  with  Article  27  of 
Regulation (EU) 2021/241, the 2022 National Reform Programme also reflects Italy’s 
bi-annual reporting on the progress made in achieving its recovery and resilience plan.  
(11)  The  Commission  published  the  2022  country  report  for  Italy12  on  23  May  2022.  It 
assessed Italy’s progress in addressing the relevant country-specific recommendations 
adopted  by  the  Council  in  2019,  2020  and  2021,  and  took  stock  of  Italy’s 
implementation  of  the  recovery  and  resilience  plan,  building  on  the  Recovery  and 
Resilience Scoreboard. Based on this analysis, the country report identified gaps with 
respect  to  those  challenges  that  are  not  addressed  or  only  partially  addressed  by  the 
recovery and resilience plan, as well as new and emerging challenges, including those 
emerging  from  Russia’s  invasion  of  Ukraine.  It  also  assessed  Italy’s  progress  on 
implementing the European Pillar of Social Rights and on achieving the EU headline 
targets on employment, skills and poverty reduction, as well as progress in achieving 
the UN’s Sustainable Development Goals.  

(12)  The  Commission  carried  out  an  in-depth  review  under  Article  5  of  Regulation  (EU) 
No 1176/2011 for Italy and published its results on 23 May 202213. The Commission 
concluded  that  Italy  is  experiencing  excessive  macroeconomic  imbalances.  In 
particular, Italy continues to face vulnerabilities relating to high government debt and 
weak  productivity  growth,  in  a  context  of  labour  market  fragilities  and  some 
weaknesses in the financial sector. 

(13)  On  23  May  2022,  the  Commission  issued  a  report  under  Article  126(3)  TFEU.  This 
report discussed the budgetary situation of  Italy, as  its general  government  deficit in 
2021 exceeded the 3% of GDP Treaty reference value, while its  general  government 
debt  exceeded  the  60%  of  GDP  Treaty  reference  value  and  did  not  respect  the  debt 
reduction benchmark. The report concluded that the deficit and debt criteria were not 
fulfilled.  In  line  with  the  Communication  of  2  March  2022,  the  Commission 
considered, within its assessment of all relevant factors, that compliance with the debt 
reduction benchmark would imply a too demanding frontloaded fiscal effort that risks 
to jeopardise growth. Therefore, in the view of the Commission, compliance with the 

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Council  Implementing  Decision  of  13  July  2021  on  the  approval  of  the  assessment  of  the 
recovery and resilience plan for Italy (ST 10160/21; ST 10160/21 ADD 1 REV 2) 
SWD(2022) 616 final 
SWD(2022) 635 final 

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debt  reduction  benchmark  is  not  warranted  under  the  current  exceptional  economic 
conditions.  As  announced,  the  Commission  did  not  propose  to  open  new  excessive 
deficit  procedures  in  spring  2022  and  it  will  reassess  the  relevance  of  proposing  to 
open excessive deficit procedures in autumn 2022.    

the  economy  and  support 

(14)  On  20  July  2020,  the  Council  recommended  Italy  to  take  in  2020  and  2021  all 
necessary measures, in line with the general escape clause, to  effectively address the 
pandemic,  sustain 
the  ensuing  recovery.  It  also 
recommended Italy to pursue, when economic conditions allow, fiscal policies aimed 
at  achieving  prudent  medium-term  fiscal  positions  and  ensuring  debt  sustainability, 
while  enhancing  investment.  In  2021,  based  on  data  validated  by  Eurostat,  Italy’s 
general government deficit decreased from 9.6% of GDP in 2020 to 7.2% in 2021. The 
fiscal  policy  response  by  Italy  supported  the  economic  recovery  in  2021,  with 
temporary  emergency  measures  amounting  to  3.5%  of  GDP,  (down  from  4.4%  of 
GDP in 2020). The measures taken by Italy in 2021 have been in line with the Council 
Recommendation of 20 July 2020. The discretionary budgetary measures adopted by 
the  government  in  2020  and  2021  were  mostly  temporary  or  matched  by  offsetting 
measures.  At  the  same  time,  some  of  the  discretionary  measures  adopted  by  the 
government over the period 2020 to 2021 were not temporary or matched by offsetting 
measures,  mainly  consisting  of  a  reduction  of  social  security  contributions  in  poorer 
regions, an extension of the tax credit on employment income and the introduction of a 
family allowance. Based on data validated by Eurostat, general government debt stood 
at 150.8% of GDP in 2021. 

(15)  The  macroeconomic  scenario  underpinning  the  budgetary  projections  in  the  2022 
Stability  Programme  is  favourable  in  2022  and  realistic  thereafter.  The  government 
projects  real  GDP  to  grow  by  3.1%  in  2022  and  2.4%  in  2023.  By  comparison,  the 
Commission’s 2022 spring forecast projects a lower real GDP growth of 2.4% in 2022 
and 1.9% in 2023, mainly due to more prudent projections for domestic demand. In its 
2022  Stability  Programme,  the  Government  expects  that  the  headline  deficit  will 
decrease to 5.6% of GDP in 2022, and to 3.9% in 202314. The decrease in 2022 mainly 
reflects  the  growth  in  economic  activity  and  the  unwinding  of  most  emergency 
measures. According to the Programme, the general government debt-to-GDP ratio is 
expected to decrease to 147.0% in 2022 and to decline to 145.2% in 2023. Based on 
policy measures known at the cut-off date of the forecast, the Commission 2022 spring 
forecast  projects  a  government deficit for 2022 and 2023 of 5.5% of GDP and  4.3% 
respectively.  Compared to  the 2022 Stability Programme, the deficit projected in  the 
Commission  forecast  is  almost  the  same  in  2022  but  higher  in  2023,  mainly  due  to 
lower economic growth. At the same time, the Commission 2022 spring forecast does 
not include the additional support measures for 2022 announced in the Programme, as 
details  were  not  available  before  the  cut-off  date.  The  Commission  2022  spring 
forecast  projects  a  higher general  government  debt-to-GDP ratio, of 147.9% in  2022 
and 146.8% in  2023.  The difference is  due to the higher deficit and lower  economic 
growth.  

14 

The  estimates  presented  in  this  recital  are  based  on  the  detailed  budgetary  projections  transmitted  by 
Italy with the 2022 Stability Programme. Except for the overall figures for government deficit and debt, 
the  projections  transmitted  by  Italy  do  not  take  into  account  the  fiscal  package  announced  for  May 
2022. This package, adopted on 2 May 2022, included additional support measures in 2022 as well as 
more resources for nationally financed investment projects in both 2022 and in the coming years. 

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(16) 

Based  on  the  Commission  spring  2022  forecast,  the  medium-term  (10-year  average) 
potential output growth is estimated at 0.4%. However, this estimate does not include 
the  impact  of  the  reforms  that  are  part  of  the  Recovery  and  Resilience  Plan  and  can 
boost Italy’s potential growth. 

In 2022, the government phased out the majority of measures taken in response to the 
COVID-19 crisis, such that the temporary emergency support measures  are projected 
to  decline  from  3.5%  of  GDP  in  2021  to  1.1%  in  2022.  The  government  deficit  is 
impacted  by  the  measures  adopted  to  counter  the  economic  and  social  impact  of  the 
increase in energy prices, which in the Commission spring 2022 forecast are estimated 
at 0.5% of GDP in 2022 and phased out in 2023.15 These measures mainly consist of 
social transfers to poorer households, cuts to indirect taxes on energy consumption and 
subsidies  to  energy  companies.  These  measures  have  been  announced  as  temporary. 
However, in case energy prices remain elevated also in 2023, some of these measures 
could  be  continued.  Some  of  these  measures  are  not  targeted,  notably  the  across  the 
board  cuts  in  indirect  taxes  on  energy  consumption  (VAT  and  fixed  levies).  The 
government  deficit  is  also  impacted  by  the  costs  to  offer  temporary  protection  to 
displaced  persons  from  Ukraine,  which  in  the  Commission  2022  spring  forecast  are 
projected at 0.1% of GDP in 2022 and 2023.16  

(17)  On  18  June  2021,  the  Council  recommended  that  in  2022  Italy17  should  use  the 
Recovery  and  Resilience  Facility  to  finance  additional  investment  in  support  of  the 
recovery  while  pursuing  a  prudent  fiscal  policy.  Moreover,  it  should  preserve 
nationally-financed  investment.  The  Council  also  recommended  Italy  to  limit  the 
growth  of  nationally-financed  current  expenditure.  It  also  recommended  Italy  to 
pursue,  when  economic  conditions  allow,  a  fiscal  policy  aimed  at  achieving  prudent 
medium-term  fiscal  positions  and  ensuring  fiscal  sustainability  in  the  medium  term, 
and at the same time, to enhance investment to boost growth potential. 

(18) 

In  2022,  based  on  the  Commission’s  2022  spring  forecast  and  including  the 
information  incorporated  in  Italy’s  2022  Stability  Programme,  the  fiscal  stance  is 
projected to be supportive at - 2.7% of GDP.18 Italy plans to provide continued support 
to  the  recovery  by  making  use  of  the  Recovery  and  Resilience  Facility  to  finance 
additional  investment  as  recommended  by  the  Council.  The  positive  contribution  to 
economic activity of expenditure financed by Recovery and Resilience Facility grants 
and  other  EU  funds  is  projected  to  increase  by  0.9%  of  GDP  compared  to  2021. 
Nationally financed investment is projected to provide an expansionary contribution to 

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The figures represent the level of annual budgetary costs of those measures taken since autumn 2021, 
including current revenue and expenditure as well as – where relevant – capital expenditure measures. 
The total number of displaced persons from Ukraine to the EU is assumed to gradually reach 6 million 
by  the  end  of  2022,  and  their  geographical  distribution  is  estimated  based  on  the  size  of  the  existing 
diaspora, the relative population of the receiving Member State, and the actual distribution of displaced 
persons from Ukraine across the EU as of March 2022. For budgetary costs per person, estimates are 
based on the Euromod microsimulation model of the Commission’s Joint Research Centre, taking into 
account both cash transfers people may be eligible for as well as in-kind benefits such as education and 
healthcare. 
Council  Recommendation  of  18  June  2021  delivering  a  Council  opinion  on  the  2021  Stability 
Programme of Italy, OJ C 304, 29.7.2022, p. 53. 
A negative (positive) sign of the indicator corresponds to an excess (shortfall) of primary expenditure 
growth  compared  with  medium-term  economic  growth,  indicating  an  expansionary  (contractionary) 
fiscal policy. 

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(19) 

the fiscal stance of 0.3 percentage points in 2022.19 Therefore, Italy plans to preserve 
nationally  financed  investment,  as  recommended  by  the  Council.  The  growth  in 
nationally  financed  primary  current  expenditure  (net  of  new  revenue  measures)  in 
2022 is projected to provide an expansionary contribution of 1.3 percentage points to 
the  overall  fiscal  stance.  This  significant  expansionary  contribution  includes  the 
additional  impact  of  the  measures  to  address  the  economic  and  social  impact  of  the 
increase  in  energy  prices  (0.2  %  of  GDP)20  as  well  as  the  costs  to  offer  temporary 
protection to displaced persons from Ukraine (0.1 % of GDP). The growth in current 
expenditure  also  reflects  higher  expenditure  on  compensation  of  government  sector 
employees, due to the renewal of public contracts for the period 2019-2021, for which 
a  substantial  part  (amounting  to  ¼%  of  GDP)  will  be  recorded  in  2022,  while 
additional resources are also budgeted for the healthcare sector (0.1% of GDP). On the 
revenue  side,  the  reduction  of  personal  income  taxes  and  the  regional  tax  on 
productive  activities  (0.4%  of  GDP)  are  also  projected  to  contribute  to  the 
expansionary fiscal  stance.  Therefore, on the basis of current  Commission  estimates, 
Italy  does  not  sufficiently  limit  the  growth  of  net  nationally-financed  current 
expenditure in 2022. 

In 2023, the fiscal stance is projected in the Commission 2022 spring forecast at -1.2% 
of GDP on a no-policy  change assumption.21  Italy is  projected to  continue using the 
grants  from  the  Recovery  and  Resilience  Facility  in  2023  to  finance  additional 
investment in support of the recovery. The positive contribution  to economic activity 
of  expenditure  financed  by  Recovery  and  Resilience  Facility  grants  and  other  EU 
funds  is  projected  to  increase  by  0.7  percentage  points  of  GDP  compared  to  2022. 
Nationally-financed investment is projected to provide an expansionary contribution to 
the fiscal  stance of  0.2 percentage points in  2023.22 At the same time, the  growth in 
nationally-financed  primary  current  expenditure  (net  of  new  revenue  measures)  in 
2023 is projected to provide a broadly neutral contribution of -0.2 percentage points to 
the overall fiscal stance. This includes the impact from the phasing out of the measures 
addressing the increased energy prices (0.5% of GDP). At the same time, an increase 
in  social transfers  (0.4% of GDP), due to  their indexation to  the inflation rate of the 
previous  year,  and  additional  resources  budgeted  for  the  healthcare  sector  (0.1%  of 
GDP), which are not matched by offsetting measures, are also projected to contribute 
to the growth in net current expenditure. Therefore, the broadly neutral contribution of 
nationally  financed  current  expenditure  relies  on  the  phasing  out  of  the  measures  to 
address the impact of the increase in energy prices as currently planned. 

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21 

22 

Other nationally-financed capital expenditure is projected to provide a expansionary contribution of 0.3 
percentage points of GDP. This is explained by investment grants by the government, also financed by 
loans  under  the  Recovery  and  Resilience  Facility,  as  well  as  additional  provisions  for  government 
guarantees to SMEs. 
In  2021,  measures  to  address  the  economic  and  social  impact  of  the  increase  in  energy  prices  were 
already in place in Italy, amounting to 0.3% of GDP. These measures mainly consisted of reductions of 
fixed levies and VAT rates on electricity and natural gas bills and of an increase of the social bonus for 
electricity and natural gas bills. 
A negative (positive) sign of the indicator corresponds to an excess (shortfall) of primary expenditure 
growth  compared  with  medium-term  economic  growth,  indicating  an  expansionary  (contractionary) 
fiscal policy. 

Other  nationally-financed  capital  expenditure  is  projected  to  provide  a  neutral  contribution  of  0.0 
percentage points of GDP. 

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(20) 

(21) 

In  the  2022  Stability  Programme,  the  general  government  deficit  is  expected  to 
gradually decline to 3.3% of GDP in 2024 and to 2.8% by 2025. Therefore, the general 
government  deficit  is  planned  to  go  below  3%  of  GDP  by  2025.  These  projections 
assume a reduction in total expenditure by around 3 percentage points of GDP and a 
decrease  in  total  revenue  by  around  2  percentage  points  of  GDP  between  2023  and 
2025.  According  to  the  Programme,  the  general  government  debt-to-GDP  ratio  is 
expected to decrease by 2025, specifically falling to 143.4% in 2024 and to 141.4% in 
2025. Based on the Commission’s analysis, debt sustainability risks appear high over 
the medium term.  

In accordance with Article 19(3), point (b), and Annex V, criterion 2.2, to Regulation 
(EU) 2021/241, the recovery and resilience plan includes an extensive set of mutually 
reinforcing reforms and investments to be implemented by 2026. These address all or 
a  significant  subset  of  the  economic  and  social  challenges  outlined  in  the  country-
specific recommendations addressed to Italy by the Council in the European Semester 
in  2019 and 2020, in  addition  to  any country-specific recommendations issued up to 
the date of adoption of a plan. In particular, the effective and swift implementation of 
the  plan  has  the  potential  to  bring  enduring  structural  changes  and  therefore  have  a 
lasting  impact  on  the  Italian  economy  and  society.  A  wide  range  of  reforms  in  key 
policy  areas  are  expected  to  address  long-standing  barriers  to  economic  growth.  In 
particular,  the  plan  contains  reforms  aimed  at  fostering  structural  changes  to  the 
functioning  of  the  public  administration  and  judicial  system  and  at  improving  the 
overall business environment. Planned reforms and investments in the education, skills 
development  and  research  sectors  have  the  potential  to  enhance  human  capital  and 
research  capacities  in  the  long  run.  The  envisaged  labour  market  reforms  and 
investments  to  improve  employment  prospects,  in  particular  of  young  people  and 
women, have the potential  to  raise labour supply, provide equal  access  to  skills,  and 
ultimately  support  economic  growth.  Reforms  in  sectors  like  transport  and  water 
management  are  expected  to  structurally  improve  economic  efficiency,  inter  alia, 
through  a  more  systematic  use  of  competitive  procedures  to  assign  the  services 
contracts.  

(22)  The  implementation  of  the  recovery  and  resilience  plan  of  Italy  is  expected  to 
contribute  to  making  further  progress  on  the  green  and  digital  transitions.  Measures 
supporting  the  climate  objectives  in  Italy  account  for  37.5%  of  the  plan’s  total 
allocation, while measures supporting digital objectives account for 25% of the plan’s 
total allocation. The fully-fledged implementation of the recovery and resilience plan, 
in line with the relevant milestones and targets, will help Italy swiftly recover from the 
fallout  of  the  COVID-19  crisis,  while  strengthening  its  resilience.  The  systematic 
involvement of social partners and other  relevant  stakeholders  remains  important  for 
the  successful  implementation  of  the  recovery  and  resilience  plan,  as  well  as  other 
economic and employment policies going beyond the plan, to ensure broad ownership 
of the overall policy agenda. 

(23) 

Italy submitted the cohesion policy programming documents on 17 January 2021 for 
the Partnership Agreement23  and has submitted its first  programmes to  the  European 

23 

Regulation  (EU)  2021/1060  of  the  European  Parliament  and  of  the  Council  of  24  June  2021  laying 
down  common  provisions  on  the  European  Regional  Development  Fund,  the  European  Social  Fund 
Plus,  the  Cohesion  Fund,  the  Just  Transition  Fund  and  the  European  Maritime,  Fisheries  and 
Aquaculture Fund and financial rules for those and for the Asylum, Migration and Integration Fund, the 

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Commission. In line with Regulation (EU) 2021/1060 of the European Parliament and 
of  the  Council  of  24  June  2021,  Italy  shall  take  into  account  the  relevant  country-
specific  recommendations  in  the  programming  of  the  2021-2027  cohesion  policy 
funds. This is a prerequisite for improving the effectiveness and maximising the added 
value  of  the  financial  support  to  be  received  from  cohesion  policy  funds,  while 
promoting the coordination, complementarity and coherence between these funds and 
other  Union  instruments  and  funds.  The  successful  implementation  of  the  Recovery 
and Resilience Facility and cohesion policy programmes also depends on the removal 
of  bottlenecks  to  investment  to  support  the  green  and  digital  transition  and  balanced 
territorial development.  

(24)  Beyond the economic and social challenges addressed by the recovery and resilience 
plan,  Italy  faces  a  number  of  additional  challenges  related  to  the  taxation  system. 
Policies to increase the efficiency of the tax system can help addressing long standing 
macroeconomic imbalances. In the medium and long run, a more growth friendly and 
efficient  tax  system  would  contribute  in  reducing  the  high  government  debt,  help 
productivity growth, and support job creation, particularly for women. 

(25) 

Italy’s tax burden on labour is high and the profile of effective marginal tax rates on 
personal income is characterised by sharp discontinuities. At the end of 2021, Italy has 
taken steps to address these challenges, in particular by introducing a universal child 
allowance  and  reducing  personal  income  taxes.  These  measures  are  expected  to 
moderately  increase  labour  supply,  especially  for  women.  The  tax  wedge  on  labour 
remains very high at all income levels compared to other EU Member States. At the 
same  time,  other  sources  of  revenues,  less  detrimental  to  growth,  are  underused, 
leaving  room to  further  reduce the tax burden on labour in  a budgetary  neutral  way. 
The  cadastral  values,  which  serve  as  the  basis  for  calculating  the  property  tax,  are 
largely outdated. The number and scope of tax expenditures,  including for VAT, are 
high, and action should be taken to streamline them. Finally, despite the relatively high 
revenues  from  energy  taxes  in  Italy,  their  design  does  not  promote  sufficiently  the 
transition  to  cleaner  technologies,  due  also  to  the  extensive  use  of  environmentally-
harmful subsidies. These various dimensions are covered by the enabling law for the 
tax  reform,  presented  by  the  government  at  the  end  of  2021,  which,  following  the 
adoption, would need to be implemented by legislative decrees.  

(26) 

(27) 

In  response  to  the  mandate  by  the  EU  Heads  of  State  or  Government  set  out  in  the 
Versailles Declaration, the REPowerEU plan aims to phase out the European Union’s 
dependence on fossil fuel imports from Russia as soon as possible. For this purpose, 
the most suitable projects, investments and reforms at national, regional and EU level 
are being identified in dialogue with the Member States. These measures aim to reduce 
overall reliance on fossil fuels and shift fossil fuel imports away from Russia. 

Italy is highly dependent on energy imports from Russia, in particular gas, with 43% 
of its gas imported from Russia (slightly below the 44% EU average) and 42% of gas 
in its energy mix. Crude oil dependency on Russia is lower, at 11%, lower than the EU 
average of 26% (oil represents 32% of Italy’s energy mix).24 Even though Italy does 
not  face  significant  problems  in  the  security  of  supply  of  natural  gas  over  the  short 

24 

Internal  Security  Fund  and  the  Instrument  for  Financial  Support  for  Border  Management  and  Visa 
Policy. OJ L 231, 30.6.2021, p. 159 
Eurostat  (2020),  share  of  Russian  imports  over  total  imports  of  natural  gas,  crude  oil.  For  the  EU27 
average,  the  total  imports  are  based  on  extra-EU27  imports.  For  Italy,  total  imports  include  intra-EU 
trade. Crude oil does not include refined oil products. 

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term  given  its  significant  storage  capacity  and  the  pipeline  connections  with  North 
Africa  and  Azerbaijan,  Russia’s  invasion  of  Ukraine  may  pose  challenges  over  the 
medium  and  long  term.  Italy  has  room  to  overcome  bottlenecks  to  increase  energy 
transmission capacity both  within the country and with  neighbouring countries. New 
infrastructure and network investments  related to  gas  are recommended to  be future-
proof where possible, in order to facilitate their long-term sustainability through future 
repurposing  for  sustainable  fuels.  Italy  is  currently  diversifying  its  energy  mix  by 
increasing  the  share  of  renewables,  particularly  thanks  to  solar,  wind,  hydrogen  and 
sustainable biomethane. Still, also in view of the potential challenges stemming from 
the current geopolitical situation, there is room to speed up and increase the rollout of 
renewable  energy  sources  laid  down  in  the  National  Energy  Climate  Plan  (NECP). 
Italy has room to continue taking measures to facilitate the authorisation of renewable 
energy projects. In addition, Italy’s objectives in terms of energy efficiency may not be 
sufficient  to  address  these  challenges  nor  to  meet  the  ambitions  of  the  Fit-for-55 
package.  The  energy  efficiency  strategy  for  the  building  sector  mostly  relies  on 
temporary  measures  and  should  be  complemented  by  a  medium-  and  long-term 
strategy,  including  stronger  energy  efficiency  measures  in  businesses,  in  particular 
industry. In addition, there is a need to speed up the decarbonisation of  the transport 
sector,  including  by  accelerating  the  rollout  of  charging  points  for  electric  vehicles, 
and advancing key railway, cycling and public transport projects. Further ambition in 
reducing  greenhouse  gas  emissions  and  increasing  renewable  energy  and  energy 
efficiency will be needed for Italy to be in line with the “Fit for 55” objectives.  

(28)  While  the  acceleration  of  the  transition  towards  climate  neutrality  and  away  from 
fossil fuels will create significant restructuring costs in several sectors, Italy can make 
use of the Just Transition Mechanism in the context of cohesion policy to alleviate the 
socio-economic impact of the transition in the most affected regions. In addition, Italy 
can make use of the European Social Fund Plus to improve employment opportunities 
and strengthen social cohesion. 

(29) 

(30) 

(31) 

In  the  light  of  the  Commission’s  assessment,  the  Council  has  examined  the  2022 
Stability Programme and its opinion25 is reflected in recommendation (1) below. 

In view of the close interlinkages between the economies of euro area Member States 
and  their  collective  contribution  to  the  functioning  of  the  Economic  and  Monetary 
Union,  the  Council  recommended  that  the  euro  area  Member  States  take  action, 
including 
the 
recommendation on the economic policy of the euro area. For Italy, this is reflected in 
particular in recommendations (1) and (2) below. 

resilience  plans, 

recovery  and 

implement 

through 

their 

to 

In the light of the Commission’s in-depth review and this assessment, the Council has 
examined  the  2022  National  Reform  Programme  and  the  2022  Stability  Programme. 
Its recommendations under Article 6 of Regulation (EU) No 1176/2011  are reflected 
in  recommendations  (1)  and  (2)  below.  The  recommendations  (1)  and  (2)  also 
contribute  to  the  implementation  of  the  Recommendation  for  the  euro  area,  in 
particular  the  first,  second  and  fourth  euro  area  recommendations.  Fiscal  policies 
referred  to  in  recommendation  (1)  help  inter  alia  address  imbalances  linked  to  high 
government  debt.  Policies  referred  to  in  recommendation  (2)  help  inter  alia  address 
imbalances  related  to  high  government  debt  and  protracted  weak  productivity 
dynamics, in a context of labour market and banking sector fragilities. 

25 

Under Article 5(2) of Council Regulation (EC) No 1466/97. 

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HEREBY RECOMMENDS that Italy take action in 2022 and 2023 to:  

1. 

2. 

3. 

In  2023,  ensure  prudent  fiscal  policy,  in  particular  by  limiting  the  growth  of 
nationally-financed current expenditure below medium-term potential output growth, 
taking  into  account  continued  temporary  and  targeted  support  to  households  and 
firms  most  vulnerable  to  energy  price  hikes  and  to  people  fleeing  Ukraine.  Stand 
ready to adjust current spending to the evolving situation. Expand public investment 
for the green and digital transition and for energy security, including by making use 
of the RRF, RePowerEU and other EU funds. For the period beyond 2023, pursue a 
fiscal policy aimed at achieving prudent medium-term fiscal positions and ensuring 
credible  and  gradual  debt  reduction  and  fiscal  sustainability  in  the  medium  term 
through  gradual  consolidation,  investment  and  reforms.  In  order  to  further  reduce 
taxes  on  labour  and  increase  the  efficiency  of  the  system,  adopt  and  appropriately 
implement  the  enabling  law  on  the  tax  reform,  particularly  by  reviewing  effective 
marginal  tax  rates,  aligning  the  cadastral  values  to  current  market  values, 
streamlining  and  reducing  tax  expenditures,  also  for  VAT,  and  environmentally 
harmful subsidies while ensuring fairness, and by reducing the complexity of the tax 
code.  

Proceed with the implementation of its recovery and resilience plan, in line with the 
milestones  and  targets  included  in  the  Council  Implementing  Decision  of  13  July 
2021.  Swiftly  finalise  the  negotiations  with  the  Commission  of  the  2021-2027 
cohesion  policy  programming  documents  with  a  view 
their 
implementation. 

to  starting 

Reduce  the  reliance  on  fossil  fuels  and  diversify  energy  import.  Overcome 
bottlenecks to increase the capacity of internal  gas transmission, develop electricity 
interconnections,  accelerate 
the  deployment  of  additional  renewable  energy 
capacities  and  adopt  measures  to  increase  energy  efficiency  and  to  promote 
sustainable mobility. 

Done at Brussels, 

For the Council 
The President 

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