Italy’s government has approved the 2024 budget with around €24 billion in tax cuts and a hike in spending, despite concerns over the country’s public finances.

Under the new measures, Italy will increase the budget deficit for next year to 4.3% of GDP from the current 3.6%, due to €15.7 billion of additional borrowing, predominantly allocated to fund tax cuts. 

A further €8 billion will go towards a series of other spending measures within the health service, pensions and public sector contracts, Reuters reports, being funded by savings within the budget and higher excise duties on tobacco. 

“It is a budget that I consider very serious, very realistic,” said Prime Minister Giorgia Meloni during a press conference. 

The country’s Economy Minister Giancarlo Giorgetti stated he was confident the budget would be welcomed by markets and EU authorities. 

Investors have been pressing for a higher premium to hold Italian government bonds since the country increased its budget deficit targets for 2023-2025 in September. 

Whereas following the budget’s approval, the gap between yields on Italian 10-year bonds and their German counterparts was stable, just above 2 percentage points. 

Furthermore, existing temporary cuts to social contributions will continue into next year in a bid to help middle and low-income families tackle higher consumer prices. 

The package is worth €28 billion, including another approved decree that establishes the income tax rate at 23% for those earning up to €28,000 a year.

In addition, additional budget resources will be allocated to pensions due to the country’s rapidly ageing population. The Prime Minister said the short-term measure allowing people to retire if their age and working years total 103 would be tightened in 2024. 

Italy's state pension bill is one of the highest in the world, reaching 17% of GDP by 2042, from 15.3% last year. 

Moreover, the government stated a 2021 international agreement will come into effect in 2024 to implement a minimum global corporate tax rate of at least 15%, applicable to multinational organisations with annual revenues exceeding €750 million.