by Giselda Vagnoni

ROME (Reuters) – Council President Giorgia Meloni said on Sunday she would lead the government responsibly until the end of her term, as parliament prepares to debate a budget to support the third eurozone economy while reducing its debt.

Rome, placed this year under the European Union’s excessive deficit procedure, hopes to bring its deficit below the ceiling of 3% of gross domestic product (GDP) in 2026, compared to 3.8% targeted this year and 7.2% last year.

The Italian Parliament, where Giorgia Meloni enjoys a large majority, will begin the debate on Tuesday on the 2025 budget, which must be approved before December 31.

“Each of us is aware of the responsibility that weighs on our shoulders and we will honor until the last day the task entrusted to us by the Italians,” declared Giorgia Meloni during a meeting in Rome of her party, the Brothers of Italy.

Ratings agencies Fitch and DBRS upgraded Italy’s outlook from “stable” to “positive” in October, citing its improving fiscal trajectory.

Investors view the country’s high bond yields as attractive due to its political stability and the likelihood that the European Central Bank will continue to cut rates.

The premium that investors pay to hold Italian government bonds over top-rated German bonds narrowed on Friday to around 113 basis points, from more than 240 basis points on September 26, 2022, when the coalition of Meloni won the general election.

The positive sentiment in Italy’s bond market contrasts with France, whose political crisis is seen as an obstacle to reducing its deficit, leading to a downgrade of its credit rating by Moody’s.

INTERNATIONAL CREDIBILITY

Giorgia Meloni, who announced her resignation as president of the European Conservatives and Reformists (CRE) party on Sunday, said the stability of her government was Italy’s “greatest element of strength” because it “guarantees credibility international”.

However, despite falling annual budget deficits, Italy’s debt – which is proportionally the second highest in the European Union – is expected to fall from 134.8% of gross domestic product last year to 137.8%. in 2026, before gradually decreasing.

Economic growth is also a concern, with the latest figures showing an annual rate about half the expected 1%.

The 2025 budget funds recovery measures, including income tax cuts for low earners, while around €4 billion will come from changes to the tax on banks and insurance products.

According to amendments to Rome’s 2025 budget seen by Reuters, the government is adjusting downward plans to cut around 4.6 billion euros in funds earmarked for the auto industry by 2030 by restoring 200 million a year in 2026 and 2027.

The government will leave the cryptocurrency capital gains tax unchanged at 26% next year and increase it to 33% in 2026 and subsequent years.

The Italian internet tax will also focus on large technology companies while avoiding SMEs and publishing groups.

(Reporting by Giselda Vagnoni, additional reporting by Giuseppe Fonte, Benjamin Mallet)

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