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Italy to raise budget deficit in support for low-earners

Italy’s government on Friday won parliamentary backing for additional borrowing, after a first attempt resulted in a major setback for nationalist Prime Minister Giorgia Meloni.

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The government’s request to marginally raise this year’s budget deficit to 4.5 percent of gross domestic product (GDP) from 4.4 percent under current trends was eventually approved by parliament following a surprising defeat on Thursday.

The right-wing coalition had initially failed to secure the 201 votes needed to approve the extra borrowing at the lower house, the Chamber of Deputies, with almost 50 of its lawmakers missing, according to politicians.

The result was a shock for the right-wing bloc, in power since October, which was forced to reiterate the request to parliament and call another vote in both houses.

“I believe that we learn from our mistakes, so I hope there will be no similar situations in the future,” Economy Minister Giancarlo Giorgetti told reporters in Senate.

A senior coalition lawmaker, who asked not to be identified, told Reuters the defeat provided evidence of weaknesses within the alliance in parliament.

Meloni needed the parliamentary green light, as she plans to use the budget leeway to fund tax cuts for middle- and low-income workers to be unveiled on May 1, International Workers’ Day.

The extra borrowing is worth EUR 3.4 bn. It is set to go to reduce this year’s so-called “tax wedge”, the difference between the salary an employer pays and what a worker takes home, with the benefit going to employees with an annual income of EUR 35,000 and lower.

Rome also aims to make it easier for firms to offer job contracts lasting between 12 and 24 months and abolish from January 1, 2024, a “citizens’ wage” poverty relief scheme introduced in 2019.

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