Italy’s government lowered its economic growth estimates for this year and next in its first hints toward its plans for the 2020 government budget, vowing to cut taxes, increase spending, and likely sending deficit and debt levels higher.
In the Italian Treasury’s new Economic and Financial Document, best known as the DEF, government officials said the new deficit target for this year would be 2.4 percent, higher than the 2.05-percent cap agreed to in December after weeks of hard negotiations with the European Commission.
That means the deficit will add to an already massive amount of public debt, which, at 133 percent of the country’s gross domestic product, is already the second highest in the European Union, better only than Greece.
The DEF is significant because it represents the first formal clues about the country’s 2020 budget plans.
Government officials said it was necessary to spend more in order to spark economic growth, which would bring down the level of public debt in the medium term.
The plan includes rejecting or delaying an unpopular increase in the country’s value-added tax set to go into effect in 2020. The plan also calls for lower income and corporate tax rates and government stimulus including benefits for the poorest Italians and significant investments in infrastructure.
There was no immediate, formal response from the European Commission in the wake of Italy’s announcements.