Corte dei conti warns Italy's debt path is slipping and urges stronger primary surplus

Debt path under pressure

The Corte dei conti told the budget committees of the Chamber and Senate that the debt outlook in the DPFP looks broadly aligned with the Psb when measured by the debt-to-GDP level, but is in significant difficulty when the trend is considered. The court says the reversal of the upward debt trend is postponed by one year, from 2027 to 2028, and that the reduction expected by 2029 is now 1.8 points, against 2.9 points in the earlier plan, which had 2026 as the peak year.

The court puts debt at 138.5% of GDP in 2027 and expects public debt to keep rising relative to GDP next year, which it says could weigh on a government bond market already under strain. The Bank of Italy, in the same hearings, warned of worse financial conditions if long-term yields rise again globally or if technology-sector stock markets correct.

The court's central warning concerns the primary surplus.

It remains urgent for the budget policy of our country to do what is possible to strengthen the primary surplus now forecast at 2.4 per cent for 2029, including by avoiding, in the presence of shocks such as the energy one, untargeted, broad-based 'compensation' measures.

Wages lose ground to inflation

Istat said the recovery of nominal wages against price growth, which had run without interruption from the fourth quarter of 2023 to the first quarter of 2026, has come to a halt. Its president, Francesco Maria Chelli, warned the committees in these terms.

The current phase of rising inflation requires particular attention on the front of wage dynamics.

Using contract renewals signed through August and assuming none more by December, Istat projects average contract wage growth of 2.5% in 2026, against acquired IPCA inflation of 3% in September, which would mean purchasing power falls again. Household purchasing power fell 0.9% in the second quarter, and savings shrank.

Growth slows but stays positive

The court's review of the Istat quarterly accounts revised on 5 October confirmed that GDP rose in both quarters of the year. Acquired growth for 2026, seasonally and calendar adjusted, stands at 0.8%, two tenths above the assumption in the April DFP. Confidence held broadly steady for the third quarter, though it worsened in September among households, construction firms and market services, while manufacturing confidence improved modestly. The court judges the data compatible with a slowdown that would still keep a positive tone.

A budget plan without costed measures

The court said the DPFP still lacks a fuller programmatic development, particularly in sector policies, and does not quantify the financial effect of the measures planned for the budget law, as a parliamentary resolution required. It also flagged missing detail on energy and defence spending, mainly capital expenditure. On excise duties, the court said a general cut applies to all users regardless of income, is costly and is distorting, and it favours targeted help for less well-off citizens and haulage firms. Vincenzo Palomba, speaking at the hearing, listed the main downside risks as inflation, higher interest rates and the fading of the PNRR boost. The Documento programmatico di bilancio, which will set out the financial weight of the measures, is due for approval on Tuesday, 13 October.

Majority parties push competing demands

The majority parties are seeking, for the 2027 budget, lower taxes on the middle class, richer 13th-month pay, support for under-35s and the option to retire at 64, and Giancarlo Giorgetti's hearing will decide which proposals enter the law. Marco Osnato, Fratelli d'Italia's economic head and chair of the Chamber's Finance committee, proposes extending the 33% IRPEF bracket up to 60,000 euros of annual income, though the 33% rate would not apply to the whole income. Forza Italia's Antonio Tajani backs a no tax area for those up to 35, and the Lega wants a price cap on utility bills. Tajani framed the proposal this way.

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