The 3.1 per cent deficit is not a conspiracy by Istat but an error by the Ministry of Economy and Finance

“We note, not without regret, the final figures released by Istat on the 2025 deficit-to-GDP ratio,” said Economy Minister Giancarlo Giorgetti yesterday, immediately after the publication of the National Accounts, which confirmed a deficit of 3.1 per cent for 2025. Put like that, it sounds like the fault of a cynical and deceitful fate. Giorgia Meloni, on the other hand, took the Statistics Institute to task: “It has happened every year that, a year on, the figures have been revised upwards; I don’t know whether Istat is underestimating Italians or the government, and I regret that.” But the responsibility lies entirely with the Ministry of Economy and Finance. Because with proper control of public spending, the deficit would have been well below the Maastricht limit.

The revised figures appear to paint a picture identical to that of April, when Istat reported a deficit of 3.07 per cent (rounded to 3.1), due to an unexpected increase in expenditure on the Superbonus of 8.4 billion, which had more than offset the higher revenue. Now the error has been repeated. Or rather, it has been amplified.

The Istat figures, in fact, brought a couple of pieces of good news for the government. The 2025 GDP forecast has been revised upwards by 7 billion (6,954 million) compared with the April estimates. Revenue was also 2 billion (1,991 million) higher than in April. With just these two adjustments – the increase in the denominator and the reduction in the numerator – the deficit-to-GDP ratio would have stood at 2.97 per cent. This would be below 3 per cent, and Italy would have exited the infringement procedure.

The problem, however, is that compared with the April estimates, not only have GDP and revenue risen, but expenditure has also increased: Istat recorded 2.5 billion (2,488 million) in unplanned capital expenditure which, net of other adjustments to other items, has led to an overall upward revision of expenditure by 2.35 billion (2,346). This means that net borrowing – the difference between revenue and expenditure – rose by 350 million compared with April to 69.7 billion, and the deficit stood at 3.08 per cent (rounded to 3.1).

In short, over the past five months, a further 2.5 billion spent a year earlier on investments that the government had lost track of has come to light. How was this possible? 

From the perspective of public expenditure control, this is a major error. It amounts to one decimal place of GDP, practically equal to the sum spent by the government on abolishing road tax on first cars for a year. However, the shortfall is colossal when the two revisions are considered together: between the April debt report, which revealed higher expenditure on the Superbonus of around 8.4 billion, and yesterday’s revision of the national accounts, which uncovered higher capital expenditure of around 2.5 billion, the total error amounts to 11 billion euros.

This means that the state spent 0.5 percentage points of GDP without realising it. Essentially, half a budgetary manoeuvre slipped under the radar of the Ministry of Economy and Finance (MEF) and the State General Accounting Office. This means that, without this error – or rather, with greater control over expenditure – the 2025 deficit would have been 59 billion euros (instead of 69.7): there would have been no need to look at either the first or the second decimal place, because the deficit would have stood at 2.6 per cent. Well below the 3 per cent threshold. This would, in this instance, have ensured greater leeway for the Budget Law.

The error was even more glaring from a political perspective, as the Meloni government thus turned a potential triumph into a failure. From an economic perspective, a decimal point makes no difference: a deficit of 3 per cent rather than 3.1 per cent would not have provided any ‘surplus’ to spend, given that European rules stipulate a multi-year adjustment path based on the net expenditure criterion. Exiting the excessive deficit procedure would not even have provided a boost on the financial markets, as government bond yields and the spread do not fluctuate due to a decimal point difference in the deficit. Yet exiting the infringement procedure has, at some point, become a government objective: the symbol of a ‘prudent’ fiscal policy, as Minister Giorgetti keeps repeating, which has enabled the deficit to be commendably reduced from an abnormal 8.1 per cent to around 3 per cent since the start of the parliamentary term.

The European Commission had not even anticipated an exit from the infringement procedure by 2025. It was the government, having observed last year that revenue had risen substantially, which identified falling below 3 per cent a year ahead of schedule as an achievable goal. This target was virtually achieved, given that in the Budget Law, Meloni and Giorgetti had set a 3 per cent deficit as the target for the year now just ended. Yet the Ministry of Economy and Finance (MEF) was aware that the figure was precarious, given that it was a rounded-off estimate of 3.04 per cent which, strictly speaking, would not even have allowed the country to exit the infringement procedure (according to European fiscal rules, the threshold must be stayed below: being just a hair above it – even to the second decimal place – is not enough).

When, in April, Istat confirmed an estimated deficit of 3.1 per cent (3.07), Prime Minister Meloni and the entire communications apparatus at Palazzo Chigi lashed out at the statistics agency, accusing it of underestimating GDP: an additional 20 billion in GDP would have been enough to bring the deficit down to 3 per cent. The issue was not the 8.4 billion in building subsidies that had slipped through the net.

The Ministry spent the following months trying to trim the 2025 expenditure figures through the work of the Revenue Agency in identifying fraud relating to building tax credits. However, no one realised that, in the meantime, the figures were continuing to change: a further 2.5 billion in expenditure for unforeseen and unaccounted-for investments had emerged. Without those, the deficit would have been below 3 per cent. Something is not working at the Ministry of Economy and Finance (MEF), and the Superbonus fiasco had clearly demonstrated this, but the problem has not been resolved. Perhaps to keep the accounts under control, an Expenditure Agency is needed.