Italy's 2026 Budget: Balancing Prudence and Economic Concerns

The Italian Chamber of Deputies definitively approved the 2026 Budget Law with 216 votes in favor, 126 against, and 3 abstentions. This fourth budget under Prime Minister Meloni concludes a 63-day parliamentary process marked by debates over economic growth and fiscal responsibility.

Budget Overview and Key Priorities

The approved budget aims to balance fiscal prudence with economic realities, allocating €22.3 billion for interventions in 2026. This includes €7.9 billion in tax cuts and €14.4 billion in spending across various sectors.

Fiscal Measures and Economic Projections

The government aims to reduce the deficit to below 3% by 2025, avoiding EU procedures, with economic growth estimated at +0.7% for 2026, largely supported by Pnrr resources. The budget prioritizes maintaining public accounts without significantly impacting the real economy.

Here's a breakdown of the key fiscal measures:

Support for Families

Approximately €1.6 billion has been allocated to support families, increasing the bonus for working mothers to €40-60 for those with an Isee up to €40,000. Measures include extending optional parental leave up to 14 years of age, with compensation equal to 80% of salary for three months, and doubling sick leave for children to ten days a year.

Changes to Isee and Family Support

The budget modifies the Isee calculation to include foreign currency, cryptocurrencies, and remittances. Updated equivalence scales account for families with two or more children, and a pre-filled Dsu will be available from Inps.

Here are key changes to Isee and family support:

Pension Reforms

The increase in retirement age linked to life expectancy will be gradual, with an additional month in 2027 and two months in 2028. In 2026, retirement requirements remain unchanged. Minimum pension checks increase by €20 per month, but funds for early retirement of precocious and arduous workers are reduced. OpzioneDonna disappears, and it will no longer be possible to use supplementary pension income to anticipate retirement.

Details on Retirement and Pension Changes

The budget introduces several changes to the pension system:

Housing and Construction

The Isee exclusion threshold for primary residences rises to €200,000 in metropolitan city municipalities. Building incentives are confirmed, including a 50% renovation bonus for primary residences and 36% for secondary homes. The Housing Plan receives new resources, along with housing support funds for separated parents and family caregivers.

Key Changes in Housing Policies

Here's a summary of housing-related changes:

Healthcare and Business

The healthcare sector receives an additional €2.4 billion in 2026, with increases in compensation for medical staff. The pharmaceutical spending ceiling for direct purchases increases by 0.3%, while the Innovative Medicines Fund is reduced. Companies will benefit from hyper-amortization up to 180% for investments in EU instrumental goods valid until September 30, 2028, with green investments amounting to €237.7 million in 2026, €842.6 million in 2027, and €1,445.2 million in 2028.

Investment and Support for Businesses

Additional resources are allocated for the Zes tax credit (€532 million) and Transition 5.0 (€1.3 billion), while the Nuova Sabatini is refinanced.

Culture and Education

Bonus books are planned for high schools for families with an Isee up to €30,000, and contributions up to €1,500 for those choosing private schools. The Carta Valore Cultura will be introduced for 18-year-olds, with €180 million annually from 2027 for cultural activities and training courses.

Investment in Culture and Education

The budget includes several provisions for culture and education:

Taxes and Revenue Measures

The fifth scrapping of 2020-2023 tax bills allows payment up to 9 years with 3% interest. Taxes on non-EU packages will affect packages up to €150. Excise duties on fuels and tobacco increase by €552 million and €213 million in 2026, respectively. The Tobin tax increases from 2% to 4%, while the rate on crypto-asset gains rises to 33%.

An amendment clarifies that gold reserves held by the Bank of Italy belong to the Italian people.

Who Bears the Costs?

Ministries will undergo total cuts of €7.15 billion over three years, including €2.2 billion in 2026, while the Pnrr will guarantee approximately €5 billion in coverage. Banks and insurance companies will be affected by the increase in Irap. Citizens will contribute through excise duties on fuels (€552 million), increased tobacco prices (€213 million), and an increased rate on RC auto policies for driver injuries (12.5%).