The Italian government will have to hit the brakes in the coming years to adhere to the re-instated and reformed EU budget rules. Last year, Italy posted a public budget deficit of 7.2% of GDP, compared to the limit of 3%, and a public debt ratio of 137.3% (reference level 60%). Although the new budget rules are less strict than the old ones and offer more wiggle room for strategic investments, they require Italy to significantly tighten fiscal policy over the coming years – partly because the major costs of the Superbonus tax credit scheme will continue to haunt public finances (see box 1). Based on recent ... (full story)