Recommendation for a COUNCIL RECOMMENDATION endorsing the national medium-term fiscal-structural plan of Italy
Date: 2024-11-26
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: Italy, budget deficit, coordination of EMU policies, economic reform, fiscal policy, investment, macroeconomics, national planning, public debt, structural adjustment

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   EUROPEAN COMMISSION  Strasbourg, 26.11.2024  COM(2024) 718 final  Recommendation for a COUNCIL RECOMMENDATION endorsing the national medium-term fiscal-structural plan of Italy  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

endorsing the national medium-term fiscal-structural plan of Italy 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 121 thereof, 

Having regard to Regulation (EU) 2024/1263, and in particular Article 17 thereof, 

Having regard to the recommendation from the Commission, 

Whereas: 

GENERAL CONSIDERATIONS 

(1) 

(2) 

1 

2 

3 

4 

A reformed EU economic governance framework entered into force on 30 April 2024. 
Regulation  (EU)  2024/1263  of  the  European  Parliament  and  of  the  Council  on  the 
effective  coordination  of  economic  policies  and  on  multilateral  budgetary 
surveillance1,  together  with  the  amended  Regulation  (EC)  No  1467/97  on  the 
implementation  of  the  excessive  deficit  procedure2,  and  the  amended  Council 
Directive  2011/85/EU  on  the  budgetary  frameworks  of  Member  States3  are  the  core 
elements of the reformed EU economic governance framework. The framework aims 
at  ensuring  public  debt  sustainability  and  sustainable  and  inclusive  growth  through 
reforms  and  investments.  It  promotes  national  ownership  and  has  a  medium-term 
focus, combined with an effective and coherent enforcement of the rules.  

The  national  medium-term  fiscal-structural  plans  that  Member  States  submit  to  the 
Council  and  to  the  Commission  are  at  the  centre  of  the  new  economic  governance 
framework. The plans are to deliver on two objectives: i) ensuring that, by the end of 
the adjustment period, general government debt is on a plausibly downward trajectory, 
or stays at  prudent  levels,  and that the government  deficit is  brought and maintained 
below the reference value of 3% of GDP over the medium term, and ii) ensuring the 
delivery  of  reforms  and  investments  responding  to  the  main  challenges  identified  in 
the context of the European Semester and addressing the common priorities of the EU. 
To that end, each plan is to present a medium-term commitment to a net expenditure4 

L, 

(OJ 

1466/97 

Regulation 

(EC)  No 

Regulation  (EU)  2024/1263  of  the  European  Parliament  and  of  the  Council  of  29  April  2024  on  the 
effective  coordination  of  economic  policies  and  on  multilateral  budgetary  surveillance  and  repealing 
ELI: 
Council 
http://data.europa.eu/eli/reg/2024/1263/oj). 
Council  Regulation  (EU)  2024/1264  of  29  April  2024  amending  Regulation  (EC)  No  1467/97  on 
speeding  up  and  clarifying  the  implementation  of  the  excessive  deficit  procedure  (OJ  L,  2024/1264, 
30.4.2024, ELI: http://data.europa.eu/eli/reg/2024/1264/oj). 
Council Directive (EU) 2024/1265 of 29 April 2024 amending Directive 2011/85/EU on requirements 
for  budgetary 
(OJ  L,  2024/1265,  30.4.2024,  ELI: 
http://data.europa.eu/eli/dir/2024/1265/oj). 
Net expenditure as defined in Article 2 of Regulation (EU) 2024/1263, namely government expenditure 
net  of  (i)  interest  expenditure,  (ii)  discretionary  revenue  measures,  (iii)  expenditure  on  Union 
programmes fully matched by revenue from Union funds,  (iv) national expenditure on co-financing of 

the  Member  States 

frameworks  of 

2024/1263, 

30.4.2024, 

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path, which effectively establishes a budgetary constraint for the duration of the plan, 
covering four or five years (depending on the regular term of legislature in a Member 
State).  In  addition,  the  plan  is  to  explain  how  the  Member  State  will  ensure  the 
delivery  of  reforms  and  investments  responding  to  the  main  challenges  identified  in 
the  context  of  the  European  Semester,  in  particular  in  the  country-specific 
recommendations  (including  those  pertaining  to  the  macroeconomic  imbalances 
procedure (MIP), if applicable), and how the Member State will address the common 
priorities of the Union. The period for fiscal adjustment covers a period of four years, 
which  may  be  extended  by  up  to  three  years  if  the  Member  State  commits  to 
delivering a set of relevant reforms and investments that satisfies the criteria set out in 
Regulation (EU) 2024/1263.  

(3) 

(4) 

Following the submission of the plan, the Commission is to assess whether it complies 
with the requirements of Regulation (EU) 2024/1263. 

Upon  a  recommendation  from  the  Commission,  the  Council  is  to  then  adopt  a 
recommendation to set the net  expenditure path  of the Member State concerned and, 
investment  commitments 
the  set  of  reform  and 
where  applicable,  endorses 
underpinning an extension of the fiscal adjustment period. 

CONSIDERATIONS  CONCERNING  THE  NATIONAL  MEDIUM-TERM  FISCAL-
STRUCTURAL PLAN OF ITALY 

(5) 

On 15 October 2024, Italy submitted its national medium-term fiscal-structural plan to 
the Council and to the Commission. The submission took place following an extension 
of  the  deadline  set  out  in  Article  36(1)(a)  of  Regulation  (EU)  2024/1263,  as  agreed 
with the Commission in view of the reasons provided by Italy. 

Process prior to the submission of the plan 

(6) 

5 

6 

On  21  June  2024  the  Commission  sent,  according  to  Article  9  of  Regulation  (EU) 
2024/1263, the reference trajectory5 to Italy. The Commission published the reference 
trajectory on 15 October 20246. The reference trajectory is risk-based and ensures that, 
by  the  end  of  the  fiscal  adjustment  period  and  in  the  absence  of  further  budgetary 
measures  beyond  the  adjustment  period,  general  government  debt  is  on  a  plausibly 
downward trajectory or stays at prudent levels over the medium term, and the general 
government  deficit  is  brought  below  3%  of  GDP  over  the  adjustment  period  and 
maintained  below  that  reference  value  over  the  medium  term.  The  medium  term  is 
defined  as  the  ten-year  period  after  the  end  of  the  adjustment  period.  In  accordance 
with  Articles  6,  point  (d),  7  and  8  of  Regulation  (EU)  2024/1263,  the  reference 

programmes funded by the Union, (v) cyclical elements of unemployment benefit expenditure and (vi) 
one-offs and other temporary measures.  
Prior  guidance  transmitted  to  the  Member  States  and  Economic  and  Financial  Committee  includes 
trajectories  without  and  with  an  extension  of  the  adjustment  period  (covering  4  and  7  years, 
respectively).  It  also  includes  the  main  initial  conditions  and  underlying  assumptions  used  in  the 
Commission’s  medium-term  government  debt  projection  framework.  The  reference  trajectory  was 
calculated on the basis of the methodology described in the Commission’s Debt Sustainability Monitor 
2023  (https://economy-finance.ec.europa.eu/publications/debt-sustainability-monitor-2023_en).  It 
is 
based on the Commission Spring 2024 Forecast and its medium-term extension up to 2033, and long-
term GDP growth and ageing costs are in line with the joint Commission-Council 2024 Ageing Report 
(https://economy-finance.ec.europa.eu/publications/2024-ageing-report-economic-and-budgetary-
projections-eu-member-states-2022-2070_en). 
https://economy-finance.ec.europa.eu/economic-and-fiscal-governance/national-medium-term-fiscal-
structural-plans_en#italy  

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trajectory  is  also  consistent  with  the  deficit  benchmark,  the  debt  sustainability 
safeguard and the deficit resilience safeguard. The reference trajectory of Italy sets out 
that,  based  on  the  Commission’s  assumptions  and  assuming  a  7-year  adjustment 
period, net expenditure should not grow by more than the values provided in Table 1. 
This  corresponds  to  average  net  expenditure  growth  of  1.5%  over  the  adjustment 
period (2025-2031) and of 1.5% over the period covered by the plan (2025-2029). 

Table 1: Reference trajectory provided by the Commission to Italy on 21 June 2024 

2025 

2026 

2027 

2028 

2029 

2030 

2031 

Average 
2025-
2029 

Average 
2025-
2031 

Maximum net 
expenditure 
growth (annual, %) 

1.6 

1.6 

1.5 

1.4 

1.3 

1.3 

1.4 

1.5 

1.5 

Source: Commission’s calculations. 

(7) 

(8) 

(9) 

In  line  with  Article  12  of  Regulation  (EU)  2024/1263,  Italy  and  the  Commission 
engaged in a technical dialogue from July to September 2024. The dialogue centred on 
the  net  expenditure  path  envisaged  by  Italy  and  its  underlying  assumptions  (in 
particular  macroeconomic  assumptions  and  elasticities),  the  envisaged  set  of  reform 
and  investment  commitments  to  underpin  an  extension  of  the  adjustment  period 
including reforms and investments such as reforms in the area of civil justice, public 
tax  administration,  public 
administration,  childcare,  business  environment, 
expenditure  management  and  State-owned  enterprises,  as  well  as  the  envisaged 
delivery  of  reforms  and  investments  responding  to  the  main  challenges  identified  in 
the context of the European Semester and the common priorities of the Union in fair 
green  and  digital  transition,  social  and  economic  resilience,  energy  security  and  the 
build-up of defence capabilities. 

In September 2024, in line with Article 11(3) and 36(1), point (c) of Regulation (EU) 
2024/1263, according to the information provided by Italy in its plan, Italy engaged in 
a  consultation  process  with  social  partners,  local  and  regional  authorities  and  other 
relevant stakeholders.  

Italy’s  Fiscal  Council  (Parliamentary  Budget  Office)  delivered  an  opinion  on  the 
macroeconomic forecast and the macroeconomic assumptions underpinning the multi-
annual  net  expenditure  path.  It  concluded 
the  main 
macroeconomic variables lie within acceptable intervals, although some are situated at 
the upper edge, and the overall outlook hinges on the full and timely implementation 
of the recovery and resilience plan (RRP) as well as on a stable international context.  

the  forecasts  of 

that 

(10)  The  plan  was  approved  by  Parliament  on  9  October  following  hearings  of  several 
stakeholders,  as  customary  for  parliamentary  endorsements  of  budgetary  planning 
documents. 

Other related processes  

(11)  On 26 July 2024, the Council established the existence of an excessive deficit in Italy 
due  to  non-compliance  with  the  deficit  criterion7.  The  present  Recommendation 
coincides with the Council Recommendation under Article 126(7) TFEU with a view 

7 

OJ L, 1.8.2024, ELI: https://eur-lex.europa.eu/eli/dec/2024/2124/oj 

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to  bringing  an  end  to  the  situation  of  an  excessive  government  deficit  in  Italy8.  The 
simultaneous adoption of those recommendations, which is tailored to and justified by 
the  transition  to  the  new  economic  governance  framework,  ensures  consistency 
between the recommended adjustment paths.  

(12)  On 15 October 2024, Italy submitted its Draft Budgetary Plan for the year 2025. The 
Commission  adopted  an  opinion  on  this  Draft  Budgetary  Plan  on  [26  November 
2024]9.  

(13)  On  19  June  2024, 

the  Commission  concluded 

is  experiencing 
macroeconomic  imbalances.  In  particular,  Italy  faces  vulnerabilities  related  to  high 
government  debt  and  weak  productivity  growth  in  a  context  of  labour  market 
fragilities  and  some  residual  weaknesses  in  the  financial  sector,  which  have  cross-
border relevance10. 

Italy 

that 

(14)  On  21  October  2024,  the  Council  addressed  to  Italy  a  series  of  country-specific 

recommendations (CSRs) in the context of the European Semester11. 

SUMMARY OF THE PLAN AND THE COMMISSION’S ASSESSMENT THEREOF 

(15) 

In  line  with  Article  16  of  Regulation  (EU)  2024/1263,  the  Commission  assessed  the 
plan as follows: 

Context: macroeconomic and fiscal situation and outlook  

(16)  Economic  activity  in  Italy  grew  by  0.7%  in  2023,  driven  by  consumption  and 
investment, fuelled by government incentives. Net exports also contributed to growth, 
while  the  negative  inventory  cycle  dampened  it.  According  to  the  European 
Commission  Autumn  2024  Forecast,  the  economy  is  expected  to  grow  by  0.7%  in 
2024, as investment still expands while private consumption stagnates. Net exports are 
set to support growth, thanks to falling imports, while inventories subtract from it. In 
2025, real GDP is set to increase by 1.0%, driven by household consumption, which is 
supported by real wage growth, while overall investment is set to rise only marginally, 
due to falling construction for housing renovations. In 2026, real GDP is expected to 
increase by 1.2%, as capital expenditure accelerates thanks to spending related to the 
RRP  and  easier  financing  conditions.  Over  the  forecast  horizon  (i.e.,  2024-2026), 
potential GDP  growth in  Italy is  expected to  decrease slightly from  1.3% in  2024  to 
0.9% in 2026. The unemployment rate stood at 7.7% in 2023 and is projected by the 
Commission  at  6.8%  in  2024,  6.3%  in  2025  and  6.2%  in  2026.  Inflation  (GDP 
deflator)  is  projected  to  decrease  from  5.8%  in  2023  to  1.6%  in  2024,  and  to  reach 
1.9% in 2025 and 1.8% in 2026.  

(17)  Regarding fiscal  developments, in  2023  Italy’s general  government  deficit  amounted 
to 7.2% of GDP. According to the European Commission Autumn 2024 Forecast, it is 
set to reach 3.8% of GDP in 2024 and to decline further to 3.4% of GDP in 2025 and, 
on  a  no-policy  change  basis,  to  2.9%  in  2026.  The  European  Commission  Autumn 

8 

9 
10 

11 

Recommendation for a Council Recommendation with a view to bringing an end to the situation of an 
excessive deficit in Italy, 26.11.2024, COM(2024)954 final. 
Commission Opinion on the Draft Budgetary Plan of Italy, 26.11.2024, C(2024)9057 final. 
‘Communication from the Commission to the European Parliament, the Council, the European Central 
Bank, the European Economic and Social Committee, the Committee of the Regions and the European 
Investment Bank’, COM (2024) 600 final, Appendix 4 
Council Recommendation on economic, budgetary, employment and structural policies of Italy, not yet 
published. 

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2024 Forecast includes Italy’s draft budget for 2025 that the government submitted to 
the national parliament in October. General government debt was 134.8% of GDP at 
end-2023.  According  to  the  European  Commission  Autumn  2024  Forecast,  the  debt 
ratio  is  expected  to  increase  to  136.6%  of  GDP  at  end-2024.  Despite  primary 
surpluses, the debt ratio is projected to increase further to 138.2% of GDP at end-2025 
and 139.3% at end-2026. The fiscal forecast by the Commission does not consider the 
policy commitments in the medium-term plans as such until they are underpinned by 
credibly announced and sufficiently specified concrete policy measures. 

Net expenditure path and main macroeconomic assumptions in the plan  

(18) 

Italy’s  national  medium-term  fiscal-structural  plan  covers  the  period  2025-2029  and 
presents a fiscal adjustment over seven years.  

(19)  The  plan  contains  all  information  required  by  Article  13  of  Regulation  (EU) 

2024/1263.  

(20)  The  plan commits  to the net  expenditure path  indicated in  Table 2, corresponding to 
average net  expenditure growth  of 1.6% over the years  2025-2029.  In addition,  Italy 
commits to a set of reforms and investments with the view to extending the adjustment 
period  to  7  years  (2025-2031),  over  which  the  average  net  expenditure  growth  is 
planned to be 1.5%. The average net expenditure growth reported in the plan over the 
adjustment period (2025-2031) is  equal  to  the reference trajectory transmitted by the 
Commission  on  21 June 2024.  The  plan  assumes  potential  GDP  growth  to  gradually 
decrease from 1.4% in 2024 to 0.3% in 2031. In addition, the plan expects the growth 
rate  of  the  GDP  deflator  to  remain  broadly  stable  at  around  2%  over  the  adjustment 
period. 

Implications of the plan’s net expenditure commitments for general government debt  

(21) 

If the net  expenditure path  committed to  in  the plan and the underlying assumptions 
materialise,  general  government  debt  would,  according  to  the  plan,  increase  up  to 
137.5% of GDP at the end of 2027 (from 135.8% of GDP in 2024) and then decrease 
to  132.5%  of  GDP  at  the  end  of  the  adjustment  period  (2031),  as  per  the  following 
table.  After  the  adjustment,  over  the  medium  term  (i.e.  until  2041),  the  debt  ratio  is 
projected  to  steadily  decline  according  to  the  plan,  reaching  113.7%  by  2041.  Thus, 
according to the plan, the general government debt ratio would be put on a downward 
path  by  the  end  of  the  adjustment  period  (2031).  This  is  plausible  as,  based  on  the 
plan’s  assumptions,  debt  is  projected  to  decline  over  the  ten  years  following  the 
adjustment  period  under  all  deterministic  stress  tests  of  the  Commission’s  Debt 
Sustainability Analysis, and the stochastic projections indicate that debt would decline 
with a sufficiently high probability.  

Therefore,  based  on 
the  plan’s  policy  commitments  and  macroeconomic 
assumptions, the net expenditure path put forward in the plan  is consistent with the 
requirement for debt as set out in Articles 6, point (a), and 16(2) of Regulation (EU) 
2024/1263. 

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Table 2: Net expenditure path and main assumptions in Italy’s plan  

Extension of the 
adjustment period 

2024 

2025 

2026 

2027 

2028 

2029 

2030 

2031 

Average 
over the 
period of 
validity 
of the 
plan 

2025-
2029 

Average 
over the 
adjustme
nt period 

2025-
2031 

Net 
expenditure 
growth 
(annual, %) 

Net 
expenditure 
growth 
(cumulative
, from base 
year 2023, 
%) 

Potential 
GDP 
growth (%) 

Inflation 
(GDP 
deflator 
growth) 
(%) 

-1.9 

1.3 

1.6 

1.9 

1.7 

1.5 

1.1 

1.2 

1.6 

1.5 

-1.9 

-0.7 

0.9 

2.8 

4.6 

6.2 

7.4 

8.7 

n.a. 

n.a. 

1.4 

1.3 

1.1 

1.0 

0.9 

0.7 

0.5 

0.3 

1.1 

0.8 

1.9 

2.1 

2.0 

1.8 

2.0 

2.0 

2.1 

2.2 

2.0 

2.0 

Source: Medium-term fiscal-structural plan of Italy and Commission calculations. 
Table 3: General government debt and balance developments in Italy’s plan  

2023 

2024 

2025 

2026 

2027 

2028 

2029 

2030 

2031 

2041 

Government 
debt 
(% of GDP) 

Government 
balance 
(% of GDP) 

134.8 

135.8 

136.9 

137.8 

137.5 

136.4 

134.9 

133.9 

132.5 

113.7 

-7.2 

-3.8 

-3.3 

-2.8 

-2.6 

-2.3 

-1.8 

-1.7 

-1.5 

-1.9 

Source: Medium-term fiscal-structural plan of Italy. 
Implications  of  the  plan’s  net  expenditure  commitments  for  the  general  government 
balance 

(22)  Based  on  the  plan’s  net  expenditure  path  and  assumptions,  the  general  government 
deficit  would  decline  to  2.8%  of  GDP  in  2026  and  to  1.5%  of  GDP  in  2031.  Thus, 
according  to  the  plan,  the  general  government  balance  would  not  exceed  the  3%  of 
GDP reference value at the end of the adjustment period (2031). In addition, in the ten 
years following the adjustment period (i.e. until 2041), the government deficit would 

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not  exceed  3%  of  GDP.  Therefore,  based  on  the  plan’s  policy  commitments  and 
macroeconomic  assumptions,  the  net  expenditure  path  put  forward  in  the  plan  is 
consistent  with  the requirement for the deficit as set  out  in  Articles  6, point  (b),  and 
16(2) of Regulation (EU) 2024/1263. 

Time profile of the fiscal adjustment 

(23)  The  time  profile  of  the  fiscal  adjustment,  measured  as  the  change  in  the  structural 
primary  balance,  as  described  in  the  plan,  is  slightly  frontloaded,  compared  to  the 
linear  path  referred  to  as  a  rule  under  Article  6,  point  (c),  of  Regulation  (EU) 
2024/1263.  In  particular,  the  structural  primary  balance  is  projected  to  improve  by 
0.6% both in 2025 and 2026, followed by an improvement of 0.5% of GDP each year 
until  2031.  As  a  result,  the  fiscal  adjustment  over  the  first  four  years  of  the  plan  is 
more  than  proportional  to  the  total  adjustment  effort.  Therefore,  based  on  the  plan’s 
policy  commitments  and  macroeconomic  assumptions,  the  net  expenditure  path  put 
forward in  the plan  is consistent with  the no-backloading safeguard clause set  out  in 
Articles 6, point (c), of Regulation (EU) 2024/1263. 

Table 4: Structural primary balance developments in Italy’s plan  

2023 

2024 

2025 

2026 

2027 

2028 

2029 

2030 

2031 

Structural 
primary 
balance 
(% of GDP) 

Change in 
structural 
primary 
balance 
(pps.) 

-4.5 

-0.5 

0.0 

0.6 

1.1 

1.6 

2.2 

2.7 

3.2 

n.a. 

4.0 

0.6 

0.6 

0.5 

0.5 

0.5 

0.5 

0.5 

Source: Medium-term fiscal-structural plan of Italy. 

Consistency of the plan with the excessive deficit procedure 

(24)  The net expenditure path set out in the plan is in line with the requirements under the 
excessive  deficit  procedure  (in  particular  with  the  minimum  annual  structural 
adjustment established in Article 3(4), third subparagraph of Council Regulation (EC) 
1467/97). 

Consistency of the plan with the deficit resilience safeguard  

(25)  The  requirement  of  the  preventive  arm  set  out  in  Article  8  of  Regulation  (EU) 
2024/1263 regarding the deficit resilience safeguard, which aims to provide a common 
margin  relative  to  the  deficit  reference  value  of  3%  of  GDP,  applies  to  Italy  as  of 
2027,  as  the  deficit  is  planned  to  be  below  3%  of  GDP  as  of  2026.  As  of  2027  the 
annual adjustment in the structural primary balance should  therefore not  be less than 
0.25% of GDP if the structural deficit remained above 1.5% of GDP in the preceding 
year, to achieve a common resilience margin in structural terms of 1.5% of GDP. The 
annual  fiscal  adjustment  that  results  from  the  plan’s  policy  commitments  and 
macroeconomic  assumptions  exceeds  0.25%  in  each  of  the  years  2027,  2028,  2029, 
2030  and  2031.  Therefore,  based  on 
the  plan’s  policy  commitments  and 
macroeconomic  assumptions,  the  net  expenditure  path  put  forward  in  the  plan  is 
consistent with the deficit resilience safeguard. 

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Consistency of the plan with the debt sustainability safeguard 

(26) 

In  accordance  with  Article  7  of  Regulation  (EU)  2024/1263,  as  general  government 
debt will be above 90% of GDP over the adjustment period according to the plan, the 
debt ratio is required to decline by at least 1 percentage point on average per year until 
it falls below 90%, after which it should decline by 0.5 percentage points on average. 
This average decline is calculated over the period 2027--2031, i.e. starting in the year 
in which the excessive deficit procedure would be abrogated according to the plan, and 
amounts to  1.2 percentage point (see Table 3).  Therefore, based on the  plan’s policy 
commitments and macroeconomic assumptions, the net expenditure path  put forward 
in the plan is consistent with the debt sustainability safeguard. 

Macroeconomic assumptions of the plan 

(27)  The  plan  is  based  on  a  set  of  assumptions  which  differs  from  the  Commission’s 
assumptions transmitted to Italy on 21 June 2024. In particular, the plan uses different 
assumptions  for  nine  variables,  namely  the  starting  point  (i.e.,  structural  primary 
balance  in  2024),  potential  GDP  growth,  real  GDP  growth,  nominal  implicit  interest 
rate,  fiscal  multiplier,  stock-flow  adjustments,  one-offs,  revenue  assumptions  (i.e. 
assumed  elasticities),  and  output  gap  closure.  Moreover,  the  fiscal  adjustment  is 
slightly  frontloaded.  An  assessment  of  the  differences  in  assumptions  is  provided 
below. The differences in assumptions with the most significant impact on average net 
expenditure  growth  are  listed  below,  together  with  an  assessment  of  each  difference 
considered in isolation. 

• 

• 

• 

• 

The plan assumes a more favourable initial fiscal position, assuming a budget deficit 
of 3.8% of GDP for 2024, while the reference trajectory assumed 4.4% of GDP. This 
implies a better initial structural primary balance in Italy’s DSA projections (-0.5% 
compared  to  -1.1%  of  GDP  in  the  reference  trajectory).  This  reflects  more  recent 
fiscal data (with higher tax revenues than expected in the Commission’s assumptions 
in the prior guidance, as well as updated estimates of expenditure). This is broadly in 
line  with  the  European  Commission  2024  Autumn  Forecast.  This  difference  in 
assumptions  contributes  to  slightly  higher  average  net  expenditure  growth  over  the 
adjustment period in the plan than according to the Commission’s assumptions. This 
assumption is deemed to be duly justified. 

Italy projects a slightly higher (0.1 percentage point) average potential GDP growth 
in the entire 2025-2031 adjustment period compared to the reference trajectory (0.8% 
vs  0.7%).  This  reflects  an  update  of  the  macroeconomic  outlook  and  is  consistent 
with  the commonly  agreed methodology. This  update contributes to  higher average 
net expenditure growth over the adjustment period in the plan than according to the 
Commission’s assumptions. This assumption is deemed to be duly justified. 

The  plan  projects  a  slightly  lower  average  GDP  deflator  over  2025-2031  than 
according  to  the  Commission’s  assumptions,  at  2.0%  compared  to  2.1%.  In  2024, 
based  on  outturn  data  until  the  second  quarter,  the  plan  has  a  1.9%  GDP  deflator, 
lower  than  the  2.2%  projected  by  the  European  Commission.  In  2025,  the  GDP 
deflator  remains  0.3  percentage  points  higher  than  in  the  prior  guidance,  while  it 
turns lower in 2027-2029. This contributes to lower average net expenditure growth 
over  the  adjustment  period  in  the  plan  than  according  to  the  Commission’s 
assumptions. This is assumption is deemed to be duly justified. 

The  plan  assumes  a  more  prudent  revenue  elasticity,  as  opposed  to  the  unitary 
elasticity  to  potential  GDP  assumed  by  the  Commission.  This  contributes  to  lower 

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average net expenditure growth over the adjustment period in the plan than according 
to the Commission’s assumptions. This assumption is deemed to be duly justified. 

The  remaining  differences  do  not  have  a  significant  impact  on  average  net 
expenditure  growth  compared  to  the  Commission’s  assumptions.  Overall,  all  the 
differences in assumptions taken together lead to an average net expenditure growth 
in  the  plan  that  is  equal  to  the  reference  trajectory.  The  Commission  will  take  into 
account  the  above  assessment  of  the  plan’s  assumptions  in  future  assessments  of 
compliance with the net expenditure path. 

Fiscal strategy of the plan 

(28)  According  to  the  indicative  fiscal  strategy  in  the  plan,  the  commitments  on  net 
expenditure  will  be  delivered  through  both  expenditure  restraint  and  discretionary 
revenue increases. The plan mentions in particular a more prudent and efficient public 
expenditure  management  together  with  higher  revenues  from  the  fight  against  tax 
evasion. The specification of the policy measures to be adopted is to be confirmed or 
adjusted and quantified in the annual budgets. At the same time, there are risks to the 
implementation of the indicative fiscal strategy in the plan, which stem from possible 
actual  real  GDP  growth  lower  than  indicated  in  Italy’s  plan  as  well  as  a  lack  of 
information on the intended fiscal strategy (as assessed above).  In addition, the Draft 
Budgetary  Plan  for  2025  specifies  the  policy  measures  through  which  the  net 
expenditure commitment for 2025 will be achieved12. 

Set of reform and investment commitments in the plan to underpin an extension of the 
fiscal adjustment period  

(29) 

In the plan, Italy commits to 24 reforms and investments, aiming to improve potential 
growth  and  fiscal  sustainability,  to  underpin  an  extension  of  the  fiscal  adjustment 
period  from  4  to  7  years.  The  set  of  reforms  and  investments  underpinning  an 
extension  of  the  adjustment  period  is  composed  of  several  commitments  from  the 
RRP,  as  well  as  some  new  reforms  and  investments.  This  includes  the  following 
measures: 

• 

• 

Reforms  and  investments  in  the  area  of  civil  justice:  The  measures  are  linked  to 
M1C1  Reform  1.4  (civil  justice)  included  in  the  RRP,  whose  final  milestones  and 
targets  are  due  by  Q2-2026.  The  plan  includes  additional  commitments  which, 
overall,  are  aimed  at  (i)  ensuring  the  implementation  of  the  insolvency  reform, 
including  through  continued  support  to  the  Courts  in  insolvency  matters  and  the 
systematic data collection; (ii) increasing efficiency of civil courts by reducing their 
backlog  and time needed to  resolve cases;  and (iii) improving the efficiency of the 
overall justice system. In order to implement these interventions, the adequate human 
resources  in  the  court  system  shall  be  ensured.  The  corresponding  key  steps  are 
expected to be completed by Q4-2029. 

Reforms and investments in the area of tax administration: The measures are linked 
to Reform 1.12 (reform of the tax administration) included in the RRP, whose final 
milestones  and  targets  are  due  by  Q2-2026.  The  plan  includes  additional 
commitments  which,  overall,  are  aimed  at  further  increasing  revenues  stemming 
from: i) prevention and enforcement activities for tax compliance, including revenues 
generated  by  compliance  letters  and  better  tailored  compliance  strategies;  ii)  more 
targeted and risk-based anti-evasion actions, including based on wider interoperable 

12 

See Commission Opinion on the Draft Budgetary Plan of Italy, 26.11.2024, C(2024)9057 final. 

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tax  data-sets  and  artificial  intelligence  techniques.  Other  legislative  measures  are 
expected  to  strengthen  the  fight  against  tax  evasion  resulting  from  omitted 
declarations,  by  introducing  stronger  incentives  for  taxpayers  and  wider  use  of 
traceable means of payments. Other measures are aimed at improving the certainty in 
the relationship between taxpayers and the tax administration by shortening average 
VAT repayment times. The key steps related to the above-mentioned measures in the 
area of tax administration are expected to be completed by Q4-2029. 

Reforms  and  investment  in  the  area  of  business  environment:  The  measures  are 
linked to Reform 2 (Annual Competition Laws 2021, 2022, 2023 and 2024) included 
in  the  RRP,  whose  final  milestones  and  targets  are  due  by  Q4-2025.  The  plan 
includes additional commitments which, overall, are aimed at further improving the 
business  environment  by  (i)  increasing  R&D  public  expenditure;  (ii)  rationalising 
and  simplifying  incentives  for  firms;  (iii)  adopting  annual  competition  laws  to 
liberalize and remove bottlenecks and entry barriers (also of legislative or regulatory 
nature)  based  on  adequate  regulatory  impact  assessments;  and  (iv)  adopting  a 
framework law on SMEs, implementing instruments and updates on an annual basis. 
The corresponding key steps are expected to be completed by Q4-2029. 

Reforms  in  the  area  of  public  administration:  the  measures  are  linked  to  M1C1 
Reform  1.9  (public  employment  reform  and  simplification  reform)  included  in  the 
RRP,  whose  final  milestones  and  targets  are  due  by  Q2-2026.  The  plan  includes 
additional commitments aimed at: (i) promoting vertical and horizontal mobility; and 
(ii) incentivizing a performance-based framework. The corresponding key steps are 
expected to be completed by Q4-2028. 

Reforms  and  investment  in  the  area  of  childcare:  the  measures  are  linked  to 
Investment 1.1 (plan for nurseries and preschools and early childhood education and 
care  services)  included  in  the  RRP,  whose  final  milestones  and  targets  are  due  by 
Q2-2026.  The  measures  are  aimed  at:  (i)  increasing  yearly  public  expenditure  to 
cover  for  the  operating  costs  of  the  existing  and  new  childcare  facilities  including 
those created with the RRP; (ii) improvement in the availability of childcare places; 
and  (iii)  increasing  the  affordability  of  childcare.  The  corresponding  key  steps  are 
expected to be completed by Q4-2027. 

Reforms and investment in the area of public expenditure: the measures are linked to 
Reform 1.13 (reform of the spending review framework) included in the RRP, whose 
final  milestones  and  targets  are  due  by  Q2-2026.  The  plan  includes  additional 
commitments  aimed  at  (i)  strengthening  the  capacity  for  programming,  monitoring 
and evaluating public spending; (ii) strengthening the competence of the Ministry of 
Economy and Finance to conduct inspections on public spending management of all 
entities  receiving  public  support,  including  subnational  authorities  and  state-owned 
enterprises;  and (iii) reforming the framework  for the control of public expenditure 
for central public administrations, including by increasing financial responsibility of 
administrations.  The  corresponding  key  steps  are  expected  to  be  completed  by  Q2-
2029. 

The  plan  includes  reforms  that  are  new  compared  to  the  RRP  in  the  area  of  tax 
administration  and  in  the  area  of  rationalisation  of  state-owned  enterprises.  More 
specifically,  in  the  taxation  area,  the  plan  includes  commitments  aimed  at:  (i) 
simplifying the tax system through the review and streamlining of tax expenditures 
also in the areas of environmentally harmful subsidies; (ii) structurally reducing the 
tax burden on low- and middle-income families and supporting employment; and (iii) 

• 

• 

• 

• 

• 

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updating the cadastral register by mapping properties that are currently not included 
and  by  updating  cadastral  values  for  buildings  that  have  benefitted  from  public 
schemes  for  energy  efficiency  and/or  house  renovation 
interventions.  The 
corresponding  key  steps  are  expected  to  be  completed  by  Q4-2028.  In  the  area  of 
State-Owned Enterprises, the plan includes commitments aimed at streamlining and 
improving the efficiency of state-owned enterprises in line with national legislation 
(Legislative decree n. 175/2016), by ensuring and where necessary strengthening the 
implementation of the legal framework. The corresponding key step is expected to be 
completed by Q4-2027. 

(30) 

In line with Article 14 (3) of Regulation (EU) 2024/1263, each reform and investment 
underpinning  an  extension  of  the  adjustment  period  is  sufficiently  detailed,  front-
loaded, time-bound and verifiable.  

(31)  The  RRP  commitments  underpinning  the  extension  contain  significant  reforms  and 
investments  aimed  at  improving  fiscal  sustainability  and  enhancing  the  growth 
potential  of  the  economy.  In  addition,  Italy  commits  to  continuing  the  reform  effort 
over the period covered by the medium-term fiscal-structural plan and maintaining the 
nationally financed investment levels realised over the period covered by the RRP (see 
below, Table 5). The commitments will be monitored throughout the implementation 
of the plan. Accordingly, commitments under the RRP can be taken into account for 
the  extension  of  the  adjustment  period  as  provided  by  Article  36(1),  point  (d),  of 
Regulation (EU) 2024/1263.  

(32)  The set of reforms and investments underpinning the extension is expected to improve 
the  growth  and  resilience  potential  of  Italy’s  economy  in  a  sustainable  manner  as 
required by Article 14(2), point (a) of Regulation (EU) 2024/1263. Italy’s plan reports 
the  expected  impact  of  some  reforms  underpinning  the  extension  of  the  adjustment 
period (notably, public employment, business environment, and civil justice) on GDP 
growth.  The  macroeconomic  model  used  for  the  simulation  is  the  QUEST-III  R&D 
model developed by the European Commission. According to the plan, these reforms 
valid for the extension of the adjustment period would start to produce the first effects 
on  the  economy  in  2028  and  are  estimated  (in  a  prudential  scenario)  to  increase  the 
GDP  level  in  2031  by  0.5%  in  total.  More  in  detail,  reforms  in  the  area  of  public 
employment are expected to increase the GDP level in 2031 by 0.2%, reforms in the 
area  of  civil  justice  are  expected  to  increase  the  GDP  level  in  2031  by  0.2%  and 
reforms in the area of business environment are expected to increase the GDP level in 
2031 by 0.1%. The plan also estimates the impact of the reforms and investments in 
the RRP not yet implemented to increase GDP level in 2031 by 3.2% (of which, 1.7% 
explained by reforms and 1.5% explained by investments). Overall, by considering the 
reforms  and  investments  in  the  RRP  not  yet  implemented  and  part  of  the  reforms 
underpinning  the  extension  of  the  adjustment  period,  the  GDP  level  is  estimated  to 
increase  by  3.8%  by  2031  compared  to  baseline.  The  plan  also  reports  a  sensitivity 
analysis. In the adverse scenario, the impact of reforms underpinning the extension of 
the adjustment period on the GDP level would be reduced to 0.3% (from 0.5% in the 
prudential scenario). Overall, the estimates reported in the Plan are deemed plausible. 

(33)  The set of reforms and investments underpinning the extension is expected to support 
fiscal  sustainability  as  required  by  Article  14(2),  point  (b)  of  Regulation  (EU) 
2024/1263.  The  plan  illustrates  the  evolution  of  the  debt-to-GDP  ratio  in  several 
scenarios  based  on  the  DSA  underlying  the  plan  (2025-2041):  the  policy  scenario 
underlying  the  plan  and  in  the  alternative  scenarios  in  which  the  impact  of  higher 
potential and real GDP growth are isolated (‘Plan + reforms’) and in which the impact 

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on  public  revenue  is  also  captured  (‘Plan  +  reforms  +  revenue  change’).  In  the  first 
alternative  scenario,  the  impact  of  reforms  underpinning  the  extension  of  the 
adjustment  period,  improve  GDP  growth  prospects.  This  results  in  a  more  marked 
decline in the debt-to-GDP ratio compared to the policy scenario underlying the plan, 
observable starting from 2030. The debt-to-GDP ratio would decrease even more and 
would reach a level  of 109.6% in  2041. By considering  also  the improvement in  the 
primary balance following the increase in revenue generated by the higher growth (i.e. 
by considering the improvement in the primary balance by applying the semi-elasticity 
of  revenues  to  the  changed  cyclical  position),  the  debt  ratio  would  drop  further  to 
102.5%  of  GDP.  Overall,  the  estimates  reported  in  the  plan  are  deemed  plausible. 
Additional considerations about the impact of the reforms underpinning the extension 
can be made. Notably, while specific targets are not set for future spending reviews at 
this stage, the spending review process may be expected to reduce the growth rate and 
level of public expenditure, as a result of improved efficiency, and to contribute to a 
more  growth-friendly  composition  of  the  budget  by  allowing  a  reprioritization  of 
expenditure  towards  more  growth  friendly  items,  with  a  positive  impact  on  fiscal 
sustainability. Measures in the area of tax administration, are expected to provide more 
incentives  for  growth  with  a  reduction  of  the  tax  wedge  on  labour  and  ensuring  that 
the  tax  system  is  fair,  efficient  and  progressive,  with  a  positive  impact  on  fiscal 
sustainability. Regarding measures in the area of tax collection, while a specific target 
is  set  just  for  one  measure  on  tax  compliance  (at  around  0.1%  of  GDP),  the  other 
measures are expected to further improve tax compliance. Concerning measures in the 
area of childcare, they are  meant to boost labour supply and support public revenues 
and fiscal sustainability over the medium term. Finally, while specific details are not 
yet available, the measure related to state-owned enterprises is also expected to have a 
positive impact, in line with its ambition. 

(34)  The  set  of  reforms  and  investments  underpinning  the  extension  address  the  common 
priorities  of  the  EU  as  required  by  Article  14(2),  point  (c)  of  Regulation  (EU) 
2024/1263.  In particular, all the reforms  and investments  underpinning  the extension 
are expected to contribute to social and economic resilience by: (i) further reducing the 
length of legal proceedings, reducing the backlog of justice and completing fostering 
the  digital  transition  process;  (ii)  strengthening  the  commitments  in  the area  of  fight 
against  tax  evasion  by  strengthening  the  actions  already  included  in  the  RRP;  (iii) 
improving the underlying conditions within which businesses and investors operate by 
promoting increased competition and efficiency in the public administration, as well as 
reducing administrative burden and obstacles that undermine access to credit, promote 
greater  dynamism  of  businesses,  their  upscaling  and  higher  investments;  (iv) 
strengthening  the  human  capital  of  the  public  administration,  with  the  aim  of 
increasing  the  productivity,  quality  and  quantity  of  public  services  provided;  (v) 
ensuring a more efficient public spending, focusing on priority areas including R&D 
and childcare. In addition, reforms and investment in the area of public administration 
are  expected  to  contribute  to  the  improvement  of  the  overall  business  environment 
through  more  efficiency  in  the  management  of  public  employment,  particularly  by 
reinforcing  the  internal  career  path,  the  horizontal  mobility  and  the  performance 
evaluation system.  

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(35)  The set of reforms and investments underpinning the extension intends to address the 
relevant13  CSRs  issued  as  part  of  the  European  Semester,  including  those  addressed 
under the MIP as required by Article 14(2), point (d) of Regulation (EU) 2024/1263. 
In  particular,  measures  in  the  area  of  tax  administration  intend  to  address  the  fiscal 
structural  CSR  requesting  Italy  from  2019  to  2024  to  make  the  tax  system  more 
supportive to growth, notably by improving the composition of government revenues 
and supporting  growth  and fiscal  sustainability  (see also  above). Likewise,  measures 
in  the  area  of  expenditure  management  and  on  the  streamlining  of  state-owned 
enterprises  are  expected  to  contribute  to  a  more  growth-friendly  composition  of  the 
budget with a positive impact on fiscal sustainability (see also above). The 2019-2024 
CSR on justice is intended to be addressed by the measures on insolvency as well as 
by  a  number  of  investments  aimed  to  increase  the  efficiency  of  the  judicial  system. 
The measures on the public workforce that are expected to strengthen the career path, 
horizontal mobility and the permanent evaluation system have the goal of addressing 
the 2019 and 2020 CSRs on public administration. The adoption of a competition law 
on annual basis is expected to reduce barriers to competition and improve the business 
environment  thus  aiming  at  addressing the 2019  and 2024 CSRs on competition and 
business  environment.  Measures  in  the  area  of  childcare  are  intended  to  support 
women’s  participation  in  the  labour  market  and  contribute  to  tackle  negative 
demographic  trends,  in  line  with  2019  and  2024  CSRs  on  employment  and  social 
policy. All the above-mentioned CSRs are relevant under the MIP.  

(36)  The  plan  ensures  that  the  planned  overall  level  of  nationally  financed  public 
investment realised on average over the period covered by the RRP is maintained, as 
required by Article 14(4) of Regulation (EU) 2024/1263. 

Table 5: Nationally financed public investment in the plan (% of GDP) 

Average level over 
2021 to 2026 

2025 

2026 

2027 

2028 

2029 

Average over the 
duration of the plan 

2.9 

3.1 

2.9 

3.3 

3.3 

3.2 

3.2 

Source: Medium-term fiscal-structural plan of Italy. 

(37)  Finally, the set of reform and investment commitments underpinning an extension can 
be  regarded  as  consistent  with  the  commitments  in  the  RRP  and  the  Partnership 
Agreement agreed under the Multiannual Financial Framework as required by Article 
14 (4) of Regulation (EU) 2024/1263.  

(38) 

In  conclusion,  the  set  of  reforms  and  investments  underpinning  the  extension  of  the 
adjustment period is assessed as fulfilling, taken altogether, the criteria in Article 14 of 
Regulation (EU) 2024/1263. As a result, the adjustment period can be extended from 4 
to 7 years, as put forward in the plan. 

Other reform and investment  intentions  in the plan  responding to the main challenges 
identified in the context of the European Semester and addressing the common priorities 
of the Union 

13 

CSRs considered ‘relevant’ are recommendations: i) adopted by the Council from 2019 onwards, ii) for 
which the Member State has not yet made ‘full’ or ‘substantial’ progress in addressing them and are not 
outdated (assessed as ‘Not Assessed / No Input to Add ’), as assessed in the latest European Semester 
surveillance exercise (available in CeSaR (europa.eu)), iii) not linked to purely fiscal SGP-related and 
iv) not covering the same challenge but in a rephrased manner. 

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(39)  Besides  the  set  of  reforms  and  investments  underpinning  an  extension  of  the 
adjustment period, the plan describes policy intentions concerning other  reforms  and 
investments  to  respond  to  the  main  challenges  identified  in  the  context  of  the 
European Semester, especially the CSRs, including those pertaining to the MIP, and to 
address  the  common  priorities  of  the  EU.  The  plan  includes  119  reforms  and 
investments,  of  which  65  are  financially  supported  by  the  Recovery  and  Resilience 
Facility. 

(40)  Concerning  the  common  priority  of  a  fair  green  and  digital  transition,  including  the 
climate  objectives  set  out  in  Regulation  (EU)  2021/1119,  the  plan  includes  a  set  of 
reforms  and  investments.  Among  others,  the  measures  on  sustainable  finance, 
including those for the reduction of the insurance protection gap, green bonds as well 
as a number of measures under mission 2 and 7 of the RRP are expected to contribute 
to  the  green  transition.  These  measures  are  expected  to  address  the  CSRs  on  energy 
infrastructure,  energy  efficiency  and  sustainable  mobility  addressed  to  Italy  in  2022 
and 2023. The digital transition builds on the objectives set under the Digital Decade 
policy programme and is expected to benefit, for example, from the national strategy 
for  digital  competences  or  the  continuation  of  RRP  measures,  including  those  on 
digital  infrastructure,  IPCEIs,  measures  to  strengthen  technological  transfer  (through 
competence  centres  and  digital  innovation  hubs),  and  the  digitalization  of  central 
public  administrations.  These  measures  will  also  contribute  to  address  the  CSRs  on 
public  administration,  justice  system  and  digital  connectivity  addressed  to  Italy 
between 2019 and 2024 which are relevant under the MIP. 

(41)  Concerning  the  common  priority  of  social  and  economic  resilience,  including  the 
European  Pillar  of  Social  Rights,  the  plan  includes  a  number  of  measures  and 
investments,  for  example  the  strengthening  of  Assegno  Unico  Universale,  a  further 
increase of the supply of nurseries and early childcare services, and the reinforcement 
of parental leave. The education system will also benefit from measures like Agenda 
Sud, to reinforce basic skills in the south, and the continuation of efforts in vocational 
oriented  education,  with  the  reform  on  Professional  and  Technical  Institutes  and  the 
National  and  Regional  Plans  for  Skills.  The  measures  on  adult  learning,  particularly 
concerning  the  twin  transition,  and  the  labour  market,  for  example  the  GOL 
programme and measures to reduce the territorial divide in the labour market, are also 
expected  to  contribute  to  strengthening  social  and  economic  resilience.  The  latter  is 
also  expected  to  benefit  from  reforms  aimed  at  strengthening  capital  markets  to 
support access to finance for corporates – and in particular SMEs. These measures are 
expected to also address the CSRs issued from 2019 to 2024 on the functioning of the 
labour market,  active labour market  policies, skills and education which  are relevant 
under  the  MIP,  as  well  as  the  CSRs  addressed  in  the  same  period  on  equal 
opportunities, social inclusion, regional development and access to finance. The plan 
also  includes, among  others, measures  to  strengthen healthcare facilities (community 
hospitals) and improving the availability of healthcare technology devices in hospitals 
which intend to address the 2020 healthcare CSR. On the other hand, the plan does not 
contain specific reforms on pensions that would contribute to the 2019 CSR addressed 
to Italy. 

(42)  Concerning  the  common  priority  of  energy  security,  the  plan  includes  several 
measures  and  investments  including  for  example  Tyrrhenian  link  or  the  reduction  of 
the  costs  of  connection  to  the  gas  network  of  biomethane,  as  well  as  increasing  the 
uptake of renewable generation decreasing the strategic dependency on imported fossil 
fuels  or  a  number  of  measures  to  boost  energy  efficiency  in  private  and  public 

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buildings. The set of measures and investment included in the plan is overall expected 
to contribute addressing the CSR on energy security.  

(43)  Concerning  the  common  priority  of  defence  capabilities,  the  plan  recalls  measures 
already included in  RRP  related to  investments  in cybersecurity and digitalisation of 
the Ministry of Defence. 

(44)  The  plan  provides 

information  on 

the  consistency  and,  where  appropriate, 
complementarity,  with  the  cohesion  policy  funds  and  Italy’s  RRP.  Namely,  the  plan 
briefly indicates that reforms and investments  included in  the plan responding  to  the 
main challenges identified in the context of the European Semester and addressing the 
common priorities of the Union are in continuity with the actions adopted in the RRP 
and in the cohesion programmes. 

(45)  The plan provides  an overview of the public investment  needs of  Italy  related to  the 
common priorities of the EU. Concerning a fair digital transition, the plan refers to the 
Digital Decade targets and objectives and mentions the need for further investments to 
fill  the  digital  skills  needs,  including  investments  that  promote  the  improvement  of 
knowledge  and  the  requalification  of  workers  to  align  the  supply  and  demand  of 
labour  to  the  new  challenges  and  mitigate  the  possible  negative  repercussions  of  the 
digital transition, as well as additional investments in digital infrastructure, namely for 
the  development  of  edge  nodes  in  order  to  reach  the  2030  target  and  to  support  the 
digital  transformation  of  businesses  and  public  administration.  On  a  fair  green 
transition,  the  plan  reports  the  need  to  enhance  the  decarbonisation  of  transport,  the 
modal  shift  and  the  development  of  infrastructures  that  will  make  the  transport  of 
people  and  goods  more  sustainable,  also  by  strengthening  the  role  of  rail  transport. 
This is complemented by further investments enhancing the governance and efficiency 
of  the  water  distribution  system  and  the  country’s  preparedness  to  risk  of  natural 
disasters  and  climate  change,  as  well  as  investments  strengthening  biodiversity  and 
ecosystems. Several of these measures are part of the Intergrated National Energy and 
Clima  Plan.  In  relation  to  social  and  economic  resilience,  including  the  European 
Pillar  of  Social  Rights,  the  plan  reports  the  need  for  additional  investments  in  the 
following areas: (i) labour market (strengthening active labour policies, sustaining the 
investments  started  to  promote  participation  in  the  labour  market  and  the  training 
activities  needed  to  align  workers'  skills  with  those  required  by  the  labour  markets, 
including  thorough  the  continuation  of  RRP  measures  such  as  the  'Dual  System', 
apprenticeships  and  the  Universal  Civil  Service);  (ii)  education  and  training 
(sustaining the investments started with the RRP and the initiatives aimed at reducing 
skills,  territorial  and  gender  gaps,  including  by  providing  budget  to  the  New  Skills 
Plan);  (iii)  reducing  territorial  gaps  (by  continuing  investing  in  the  strategic  sectors 
defined by the cohesion policy and the Strategic Plan of the Single Special Economic 
Zone (SEZ) - including hydrogeological risk, water resources and reconstruction after 
disasters)  and  improving  infrastructure  (building  on  interventions  already  launched 
with  the  RRP,  including  for  high-speed  networks  and  regional  railways,  the 
technological  and  digital  enhancement  of  the  TEN-T  networks,  ports  and  their 
connections,  in  addition  to  strengthening  infrastructure  investments  in  the  SEZ),  (iv) 
supporting strategic supply chains, innovation and technology transfer (by continuing 
investments  in  the  RRP  for  cooperation  between  universities,  research  centres  and 
companies and for the technological and digital transformation of SMEs and business 
networks and by supporting competitiveness in key sectors of the Italian economy and 
enhancing  investments  also  in  the  tourism  sector);  (v)  healthcare  system,  measures 
against poverty and services for early childhood (by further investing in the healthcare 

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system  in  order  to  make  general  medicine  networks  more  efficient,  including 
proximity  networks,  facilities  and  telemedicine  for  assistance,  the  modernisation  of 
large  healthcare  equipment  and  research,  training  and  development  of  staff  skills, 
further investing in the fight against in-working poverty, in housing policies and in the 
reduction  of  the  risk  of  energy  poverty,  further  enhancing  low-cost  access  to  early 
childhood services, as well as the expansion of care services for disabled and non-self-
sufficient  elderly people). On  ensuring  energy security, the plan reports the need for 
additional  investments  in  the  construction  of  infrastructure  and  the  development  and 
diffusion  of  technologies  applied  to  energy  that  will  contribute  to  making  Italy  a 
European energy hub, as well as in the efficiency of buildings to reduce their energy 
consumption and in research and development and experimentation on energy carriers, 
including  new generation nuclear. On the  build-up of defence capabilities, according 
to  the  plan,  spending  in  the  defence  sector  will  increase  to  2%  of  GDP  by  2028,  in 
alignment with NATO commitments. Additional investment will be needed to ensure 
significant  participation  in  international  missions  in  relation  to  peacekeeping 
operations  and  other  activities,  increasing  resources  for  the  Cooperation  Agreement 
with Ukraine, the streamlining of the supply of materials in the context of international 
cooperation  and  collaboration  and  for  the  refinancing  of  the  ‘Safe  Roads’  and  ‘Safe 
Stations’ operations, the Fund for high and very high operational readiness assets and 
the Fund for national defence needs. 

Conclusion of the Commission’s assessment 

(46)  Overall,  the  Commission  is  of  the  view  that  Italy’s  plan  fulfils  the  requirements  of 

Regulation (EU) 2024/1263. 

OVERALL CONCLUSION 

(47) 

In accordance with Article 17 of Regulation (EU) 2024/1263, the net expenditure path 
as  set  in  the  plan  should  be  recommended  by  the  Council  to  Italy,  and  the  set  of 
reforms  and  investments  underpinning  the  extension  of  the  adjustment  period  to  7 
years should be endorsed. 

HEREBY RECOMMENDS that Italy 

1. 

2. 

Ensure  that  net  expenditure  growth  does  not  exceed  the  maxima  established  in 
Annex I to this Recommendation. 

Implement  the  set  of  reforms  and  investments  that  underpins  the  extension  of  the 
fiscal  adjustment  period 
this 
Recommendation, by the indicated deadlines. 

to  7  years,  as  established 

in  Annex  II 

to 

In  addition,  the  Council  invites  Italy  to  ensure  the  delivery  of  reforms  and 
investments  responding  to  the  main  challenges  identified  in  the  context  of  the 
European  Semester,  in  particular  in  the  country-specific  recommendations,  and 
addressing the common priorities of the Union. 

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ANNEX I 
Maximum growth rates of net expenditure 
(annual and cumulative growth rates, in nominal terms) 
Italy 

Years 

2025 

2026 

2027 

2028 

2029 

Growth 
rates (%) 

Annual 

1.3 

Cumulative (*) 

-0.7 

1.6 

0.9 

1.9 

2.8 

1.7 

4.6 

1.5 

6.2 

(*) The cumulative growth rates are calculated by reference to the base year of 2023. 

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ANNEX II 
Set of reforms and investments that underpins an extension of the adjustment period to 7 years 
Italy  

Main objective 

Reduce the length of 
bankruptcy proceedings 
and promote the use of 
out-court instruments. 

Reforms and investment in 
the area of justice -  
Adding to RRP milestones 
and targets related to 
M1C1.R1.4 - Reform of 
civil justice 

Reduce the backlog at civil 
courts. 

Description and timing of 
key steps 
Step 1: By Q2-2027, take 
actions to ensure and 
strengthen the 
implementation of the 
insolvency reform. To this 
end, continue to support 
the competencies of courts 
in insolvency matters and 
provide adequate staffing; 
strengthen the information 
system to collect granular 
information on the cost, 
efficiency and outcomes of 
insolvency and 
restructuring procedures 
(both for out-of-courts and 
in court cases). 

Step 2: By Q4-2027, carry 
out an impact assessment 
of the insolvency reform 
and adopt corrective 
actions where needed. 

Step 3: By Q4 2028, 
reduction of backlog cases 
for the Civil Ordinary 
Courts (first instance). 

Reduce the backlog at civil 
courts. 

Step 4: By Q4 2028, 
reduction of backlog cases 
for the Civil Court of 
Appeal (second instance). 

Reduce disposition time 
for civil cases. 

Step 5: By Q4 2028, 
reduction in the length of 
civil proceedings. 

Monitoring indicator(s) 

Provide continued support 
to the competencies of 
courts in insolvency 
procedures and ensure 
adequate staffing. 

Strengthening the 
information system to 
collect granular 
information on the cost, 
efficiency and outcomes of 
insolvency and 
restructuring procedures 
(both for out-of-courts and 
in court cases). 

Adoption of an impact 
assessment of the 
insolvency reform.  
Adoption and entry into 
force of corrective actions, 
where needed. 

Reduce by 90% the 
number of pending cases 
that had been opened 
between 1 January 2023 
and 31 December 2025 
and that were still open as 
of 31 December 2025 in 
the Civil Ordinary Courts 
(first instance). 

Reduce by 90% the 
number of pending cases 
that had been opened 
between 1 January 2023 
and 31 December 2025 
and that were still open as 
of 31 December 2025 in 
the Civil Court of Appeal 
(second instance). 

Reduce the disposition 
time by 12% of all 
instances of civil and 
commercial litigious cases 
compared to the 
disposition time recorded 
on 31 December 2026. 

Ensure adequate human 
resources in the court 

Step 6: By Q4-2026; Q4-
2027; Q4-2028; Q4-2029, 

Maintain 6,000 positions 
characterised by tasks 

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Reforms and investment in 
the area of tax 
administration -  
Adding to Italy’s RRP 
milestones and targets 
related to M1C1.R1.12 - 
Reform of the tax 
administration 

system. 

To promote simplified 
interactions with taxpayers 
through faster VAT 
refunds. 

To increase revenues 
stemming from prevention 
activities, tax compliance 
promotion, including 
revenues generated by 
compliance letters, and 
more targeted and risk-
based anti-evasion actions 
(including those based on 
the use of artificial 
intelligence techniques and 
the development of 
database interoperability). 

To increase revenues 
stemming from prevention 
activities, tax compliance 
promotion, including 
revenues generated by 
compliance letter, and 
more selective and risk-
based anti-evasion actions 
(including those based on 
the use of artificial 
intelligence techniques and 
the development of 
database interoperability). 

respectively, ensure 
adequate personnel for the 
office of trial and the 
technical administrative 
personnel. 

equivalent to those under 
M1C1 Investment 1.8 of 
the RRP. 

Step 1: By Q4-2025; Q4-
2027; Q4-2029, 
respectively, achievement 
of annual performance 
targets that progressively 
ensures a reduction in 
VAT repayment times. 

Reduction of average time 
of payment of VAT 
refunds (expressed in 
days) compared to 2024: 
• 5% by Q4-2025 
• 10% by Q4-2027 
• 15% by Q4-2029. 

Additional total revenue 
from prevention and 
enforcement activities 
compared to 2024 (EUR 
14 billion), including 
revenues from compliance 
letters, “inviti al 
contraddittorio”, “atti 
istruttori ravvedibili”, 
while excluding “ruoli”, 
“concordato preventivo” as 
well as any measure aimed 
at settling past tax 
liabilities at advantageous 
conditions such as 
“rottamazione cartelle 
esattoriali”, 
“saldo&stralcio” and 
“ravvedimento speciale”: 
• 5% by Q4-2027; 
• 10% by Q4-2029. 

Entry into force of primary 
and secondary legislation. 

Step 2: By Q4 2027 and 
Q4 2029, achievement of 
annual performance targets 
that progressively ensures 
higher revenues from 
prevention and 
enforcement activities. 

Step 3: By Q4 2026, 
strengthen the fight against 
tax evasion resulting from 
omitted declarations, by (i) 
in the event of detected tax 
evasion, removing tax 
advantages 
(“compensazione 
orizzontale”, “rimborsi di 
imposte”, “regimi 
premiali”) and, where 
relevant, suspending the 
exercise of the public 
concessions; (ii) 
integrating national short-
term rental codes into the 
databases for tax risk 
analyses conducted by the 
Revenue Agency; (iii) 
introducing compulsory 
connections between 
automatic cash registers 
and electronic payments 
for all businesses; (iv) 
requiring traceable means 

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Increase public spending 
on research and 
development, in order to 
raise the ratio between 
such spending and GDP, 
which is estimated to be 
close to 0.5% for 2024, to 
0.6% in 202914. 

Drastically reduce the 
number of incentive 
measures, and reduce the 
number of granting 
authorities, based on the 
results of the impact 
assessment undertaken in 
2025. 

Adoption and entry into 
force of an Annual 
Competition Law and 
related implementing acts 
each year, by addressing 
the CSRs and satisfactorily 
considering AGCM’s 
recommendations, based 
on adequate regulatory 
impact assessments. 

(a) Entry into force of the 
SME Framework Law.  
(b) Entry into force of all 
implementing instruments 
and annual updates. 

of payments for the tax 
deductibility of expenses 
related to transport, food 
and accommodation. 

Reforms and investment in 
the area of business 
environment -  
Adding to Italy’s RRP 
milestones and targets 
related to M1C2.R2 - 
Annual Competition Laws 

Increase R&D investments 
prioritizing projects that 
can crowd in additional 
private investment. 

Step 1: By Q4-2025, Q4-
2026, Q4-2027, Q4-2028, 
and Q4-2029, respectively, 
increase in public R&D 
spending. 

Fostering the efficiency 
and effectiveness of public 
incentives on investment. 

Step 2: By Q2-2028, 
rationalisation and 
simplification of incentives 
for firms, following up on 
reform M1C2-R3 in the 
RRP. 

Promotion of competition 
to foster efficiency and 
economic growth through 
the removal of bottlenecks 
and entry barriers (also of 
legislative nature). 
Removal or revision of 
laws and regulations that 
hinder the smooth 
functioning of the markets. 

Increase SMEs 
competitiveness 
facilitating business size 
growth, fostering 
generational transition, 
investment orientation and 
skills matching. 

Step 3: By Q4-2026, Q4-
2027, Q4-2028, and Q4-
2029, respectively, 
adoption of Annual 
Competition Laws. 

Step 4: By Q4-2026 (a), 
Q4-2027 (b), and Q4-2028 
(b), respectively, adoption 
of a framework law on 
SMEs, based on an impact 
assessment, and entry into 
force of the implementing 
instruments and annual 
updates. 
The law shall cover at least 
the following elements: 
•facilitating business size 
growth and firms 
aggregation; 
•administrative 
simplification; 
•ease of doing business; 
•fostering generational 
transition, including via 
hiring professional 
management. 
•enhancing investment;  
•increasing skills. 

14 

R&D expenditure is to be computed in GERD terms. 

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Reforms and investment in 
the area of public 
administration and 
childcare -  
Adding to Italy’s RRP 
milestones and targets 
related to M1C1.R1.9 - 
Reform of the public 
administration 

Promote vertical mobility. 

Step 1: By Q4-2026, 
implementation of vertical 
mobility of staff. 

Promote horizontal 
mobility. 

Valorize the performance-
based framework. 

Increase in yearly public 
expenditure. 

Step 2: By Q4-2026, 
implementation of 
horizontal mobility of 
staff. 

Step 3: By Q4-2028, 
valorisation of 
performance-based 
framework. 

Step 4: By Q4-2027, 
ensure adequate financial 
coverage for operating 
available childcare 
facilities. 

Ensure the adequate 
availability of childcare 
places. 

Definition of contribution 
brackets for parental 
contributions. 

Step 5: By Q4-2027, 
ensure adequate supply of 
childcare services in line 
with the Barcelona Target 
and the national target for 
2027, taking into account 
regional disparities. 

Step 6: By Q4-2027, 
increase the affordability 
of childcare by defining 
national minimum 
standards for both 
childcare service access 
and fee brackets, with the 
aim of increasing 
affordability. 

At least 20% of annual 
vacancies for managerial 
positions allocated to 
incumbent officials 
through a promotion 
mechanism linked to 
performance. 

At least 15% of annual 
vacancies allocated to 
officials moving from 
another public 
administration or agency. 

First round of performance 
evaluation and bonus 
payments completed under 
the new framework. 

Increase public 
expenditure to cover for 
the operating costs of the 
existing and new childcare 
facilities realised through 
NRRP investments and 
national resources, of 
children aged 0-2. The 
increase will amount to at 
least 20% of the yearly 
public expenditure 
dedicated to running costs 
of available childcare 
facilities for children under 
3 years of age including 
the costs of new places 
resulting from the NRRP 
infrastructure. 

Ensure that 33% of 
children under 3 years of 
age have access (coverage 
quota) to public and 
private childcare facilities 
at national level. Ensure a 
minimum of 15% of 
coverage at regional level. 

Entry into force of 
legislation 

Reforms and investment in 
the area of public 

To strengthen the capacity 
for programming, 

Step 1: By Q2-2027, Q2-
2028 and Q2-

Adoption of at least one 
annual monitoring and 

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expenditure -  
Adding to Italy’s RRP 
milestones and targets 
related to M1C1.R1.13 - 
Reform of the spending 
review framework 

monitoring and evaluation 
of public spending. 

2029,adoption of 
monitoring and evaluation 
plans and, from Q2-2028, 
of the annual report by the 
Ministry of Economic and 
Finance. 

To enhance expenditure 
monitoring, including 
through the creation and 
strengthening of dedicated 
structures within Public 
Administrations, for the 
assessment of the quality 
and impact of services 
provided. 

To strengthen public 
spending control activity. 

Reforms and investment in 
the area of taxation (new 
measure) 

To intervene in the tax 
system, aligning it with the 
objectives of supporting 
family burdens, economic 
growth, and ecological 

Step 2: By Q1-2028, 
strengthened competence 
of the Ministry of 
Economy and Finance to 
conduct inspections on 
public spending 
management of all entities 
receiving public support, 
including subnational 
authorities and state-
owned enterprises. 

Step 3: By Q1-2026 and 
Q1 2028, reform of the 
framework for the control 
of public expenditure for 
central public 
administrations, providing 
for enhanced financial 
responsibility of 
administrations for the 
management of resources 
as well as strengthened 
programming and 
enhanced monitoring and 
evaluation of policy 
outputs and impacts. 

Step 1: By Q4-2028, 
simplify the tax system 
through the review of the 
scope of tax expenditures. 

evaluation plan which 
envisages an intervention 
for each Ministry, which 
over the timeframe of the 
Plan covers a spending 
area equal to a total of 
10% of the spending 
allocated to policies under 
the direct responsibility of 
central administrations. 
The monitoring and 
evaluation plans formulate 
proposals and actions for 
the improvement of 
efficiency or quality of 
spending. An annual report 
prepared by the Ministry 
of Economy and Finance 
illustrates the 
implementation status of 
the monitoring and 
evaluation plans, and in 
particular the adoption of 
at least one action per 
ministry contributing to 
the sustainability of public 
finances. 

Entry into force of primary 
and secondary legislation. 

(a) Entry into force of 
primary legislation; (b) 
Entry into force of 
secondary legislation. 

A 15% reduction of 
revenue loss related to tax 
expenditures compared to 
the 2019 government 
report (49 billion euro), 

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transition within a multi-
year perspective. 

Reduction of the tax 
burden on low- and 
middle-income families 
and support for 
employment. 

Updating cadastral 
register. 

Reforms and investment in 
the area of rationalization 
of state-owned enterprises 
(new measure) 

Streamline State Owned 
Enterprises in line with 
national legislation 
(Legislative decree n. 
175/2016). 

Step 2: By Q4-2026, 
reduction of the labour tax 
wedge. 

Step 3: (a) By Q4-2027, 
mapping properties that 
are currently not included 
in cadastral register; (b) By 
Q4-2028, updating 
cadastral values for 
property taxes for 
buildings that have 
undergone energy 
efficiency and/or house 
renovation interventions, 
financed in whole or in 
part by public funds, since 
2019. 

Step 1: By Q4-2027, take 
actions to ensure and 
strengthen the 
implementation of the 
legal framework on State 
Owned Enterprises. 

including in the areas of 
environmentally harmful 
subsidies, reduced VAT 
rates and exemptions and 
personal income tax 
(IRPEF). The reduction of 
environmentally harmful 
subsidies by EUR 3.5 
billion envisaged by 2030 
under the RRP is relevant 
for the reduction of 
revenue losses related to 
tax expenditures. 

The average labour tax 
wedge shall be 
permanently reduced 
compared to the levels 
recorded in 2023. 

(a) Introduction of the 
reference legislation and 
entry into force, 
completion of activities of 
mapping, controlling and 
updating the cadastral 
register; (b) Introduction 
of the reference legislation 
and entry into force and 
completed update of the 
cadastral register for all 
properties defined in the 
key steps column/section. 

Adoption of appropriate 
actions to ensure, and 
where necessary 
strengthen, the effective 
implementation of the 
legal framework 
(Legislative decree n. 
175/2016) related to the 
activities and operational 
efficiency of State-Owned 
Enterprises with the aim of 
ensuring an effective 
rationalisation and 
dismissal of non-efficient 
SOEs without jeopardising 
the provision of public 
services. 

Done at Strasbourg, 

EN 

For the Council 
The President 

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