On Tuesday, Italian lawmakers passed measures aimed at curbing costly incentives for home renovations. However, coalition party Forza Italia abstained from voting, expressing concerns that the measures would negatively impact businesses and banks.

While the division within the government doesn't pose a significant threat, it highlights the challenges Prime Minister Giorgia Meloni faces in cutting back on schemes supported by previous administrations, Reuters reports.

These schemes have cost the state over €219 billion in four years, putting pressure on Italy's struggling finances.

The most generous incentive, known as the Superbonus, enabled homeowners to deduct the expenses of energy-saving renovations from their taxes over a period of four to 10 years. Alternatively, they could use the tax credit as a payment method when working with builders or banks.

The finance committee of the Senate has approved an amendment, supported by Economy Minister Giancarlo Giorgetti, to extend the period over which tax credits from the Superbonus scheme are applied to 10 years. This provision retroactively applies to all payments made since January of this year.

Foreign Minister Antonio Tajani, who leads Forza Italia, advocated for easing the restrictions, aligning with the concerns of businesses and banks. They argued that the retroactive nature of the plan would diminish the value of the tax credits they had already used as payment.

While Forza Italia chose not to participate in the committee vote, a majority of lawmakers supported Giorgetti and approved the package. It is expected to be definitively passed by both houses of parliament by the end of May.

The new curbs are aimed at enabling Italy to reestablish its stricter deficit targets for the next two years, which were set in September.

At that time, the government pledged to reduce the fiscal deficit to 3.6% of GDP in 2025 from 4.3% this year, and further to 2.9% in 2026.

However, according to current projections by the Treasury, the deficit is expected to be slightly higher at 3.7% next year and 3% in 2026.

Moreover, the Economy Minister said on Tuesday that although the building incentives had bolstered Italy’s post-pandemic recovery, they were unsustainable and had “drugged” the country’s economy.

“"You have to get off drugs, drugs are not a good thing,” he said in reference to the Superbonus at a conference in Milan.