But the problem – the warning sign for Italy – is that they are now acting in unison. And this is a new development. In 2025, government bond yields rose across all eurozone countries, due to a number of factors including the announcement of Germany’s defence spending plan, which triggered a rise in Bund yields and put upward pressure on other government bonds. In this context, Italy represented a positive anomaly. Although it has a high level of public debt, it was the only country to have kept BTP yields broadly at the same level as in 2024, resulting in a narrowing of the spread. The credit for this went entirely to fiscal consolidation, which, at a critical moment, stabilised public finances by bringing the deficit down to 3.1 per cent.

In 2026, however, things are taking a different turn. The trend in Italian government bonds has mirrored that of French bonds: yields have risen by around 100 basis points over the last three months, with the spread widening by around 30 points. But whilst this trend is understandable for France – which has a deficit spiralling out of control (5.4 per cent in 2026, exceeding the forecast of 5 per cent) and debt rising to 119 per cent, with a government unable to balance the books – it is less so for Italy, which continues to pursue a ‘prudent’ fiscal policy (as Giorgetti describes it), which this year is expected to bring the deficit back below 3 per cent. So why are BTPs being affected by the French contagion?

Compared with a few years ago, when the deficit stood at 8.2 per cent, the trend in Italian debt appears more sustainable: rating agencies have upgraded the country’s credit rating, Italian banks and domestic savers have absorbed a large proportion of bond issues, and the share held by foreign investors is not particularly high. However, this greater stability is not enough to prevent contagion. Indeed, according to some analysts, it has created a vulnerability. Because with domestic investors already holding very large stakes, foreign investors have become more important as marginal buyers; however, unlike their Italian counterparts, they are more cautious and less inclined to take risks during periods of turbulence. Consequently, BTPs are sensitive to shocks originating from other major European bond markets, as is currently the case with the French market.

But what does this mean for the real economy and public finances? In last year’s Public Finance Policy Document (DPFP), the Ministry of Economy and Finance (MEF) had drawn up a number of risk scenarios with their respective macroeconomic impacts. One of these scenarios assumed tension in the financial markets, with BTP yields from 2026 to 2028 more than 100 basis points higher than in the baseline scenario. This is roughly the increase that has actually occurred compared with October 2025, when the DPFP was published. According to the MEF, this scenario of a sustained rise in interest rates would have a negative impact on growth of -0.1 percentage points of GDP in 2026, -0.5 in 2027 and -0.6 in 2028. The increase in interest expenditure under this scenario – with the cost of debt rising by 100 basis points – is quantified, according to the MEF’s latest calculations, at +0.13 per cent of GDP in 2026, +0.30 per cent in 2027 and +0.45 per cent in 2028.

The impact is not significant for this year, given that the rise in inflation and growth (from 0.6 to 1 per cent) should enable the government to keep the deficit below 3 per cent. However, if the rise in interest rates were to persist over time, interest expenditure – which was forecast at 4.2 per cent in 2027 – would rise to 4.5 per cent, and in 2028 it would increase from 4.4 to 4.9 per cent of GDP. In practice, the rise in interest expenditure would eat up the entire projected increase in the primary surplus, making it increasingly difficult to stabilise public debt.

Regardless of how the French fiscal crisis unfolds, as Guido Ascari and Riccardo Trezzi pointed out in yesterday’s edition of Il Foglio, high inflation and public deficits worldwide are ushering us into a new regime characterised by higher interest rates. It would be wise for the coalitions standing in the forthcoming general election to adapt their government programmes to this shift in the macroeconomic regime.

Luciano Capone

Today, the City of Milan owns 54.8 per cent of SEA. F2i, through 2i Aeroporti, owns around 45 per cent and has full control of Sagat. The proposal under consideration is a merger between the two companies, a move that would inevitably lead to a dilution of Palazzo Marino’s stake. At this point, one might argue that there is nothing particularly surprising about this: if a smaller company is absorbed into a larger one, the shareholdings change, and what matters in the end is the value of the new entity. True. But it is precisely for this reason that the issue cannot be reduced to the percentage of shares held. What those shares enable one to do also matters – and perhaps above all else. If the merger were to be accompanied by new shareholders’ agreements or amendments to the articles of association capable of granting the private shareholder greater rights regarding the appointment of the chief executive, business strategy, the budget or investments, the municipality could formally continue to hold a majority whilst simultaneously having less power than before. This is a scenario that needs to be assessed today, not a foregone conclusion. But precisely because it needs to be assessed, it raises a question that should be of particular interest to the public shareholder: how much are those rights worth? And what does the local authority receive in return for a possible rebalancing of governance?

This is where the tender process comes into play. Not as a bureaucratic formality, nor as a means of blocking the transaction. On the contrary: as a way of determining whether the proposed transaction is truly the most advantageous. A competitive tender serves precisely this purpose: to compare values, investments, conditions, guarantees and governance rights. It serves to put a price on something that would otherwise risk being decided simply through negotiations between the parties already at the table. The documentation on the transaction specifically identifies this as one of the contentious points: the possible strengthening of the private shareholder’s governance would take place without a competitive process, with potential implications for the future contestability of the public shareholding. Naturally, a merger does not automatically amount to a sale of shares, and it would be incorrect to pretend that the legal issue has already been resolved. Article 10 of the Consolidated Act on Publicly Owned Companies provides for procedures governing the disposal of shareholdings that are based on publicity, transparency and non-discrimination, and permits direct negotiation only in justified cases. The key issue, therefore, is to ascertain whether and to what extent these rules apply to this specific transaction.

But the response “it’s not a sale, it’s a merger” cannot, on its own, bring the discussion to a close. If the merger results in a substantial change to the powers exercised over a public asset, it is reasonable to ask why that decision must be made without putting it to the market. All the more so given that an alternative route exists, at least in theory: Sea could acquire Sagat whilst keeping its shareholding structure unchanged. This does not mean that this solution is necessarily better. It might be too costly, it might be less efficient, it might make less business sense. But the very fact that it exists shows that there is not just one way to achieve the same objective. And when there are several ways to carry out a transaction involving a public asset, the question of comparing the alternatives becomes hard to avoid. Giuseppe Sala, too, has set out two very clear conditions: to create economic and social value for both areas and not to alter SEA’s current corporate structure. The PD group leader at Palazzo Marino, Beatrice Uguccioni, has called for a discussion – prior to any decision – on the business plan, the corporate balance and the economic and employment implications. In short, the issue should not be whether one is for or against the merger. It could be an excellent deal. But precisely if it is, it should be possible to demonstrate this. This is the issue that is worth keeping distinct from everything else.

There is no need to wait until a corporate matter becomes a legal case to ask whether a procedure is sufficiently transparent and competitive. In Cagliari, where another airport deal has raised precisely the issue of the lack of a public tender process, the debate has progressed much further. But in Milan, the question can be asked earlier, whilst decisions are still to be made. If a tender is not necessary, it would be useful to know clearly why. If, on the other hand, it can serve to gauge the value of the project and better safeguard the public interest, the question remains, stubbornly simple: why not hold one?

Let us begin by dispelling the false reports concerning alleged diversion of state resources which, according to Confindustria and certain journalistic analyses, are said to be caused by the reform of the framework law on the craft sector. Anyone familiar with the text of the reform knows that the alarmist estimates of hypothetical impacts exceeding one billion euros on the state coffers are entirely unfounded. In fact, a clause ensuring financial neutrality with regard to social security contributions to INPS is provided for: craft enterprises which, as they grow, exceed the standard thresholds for the number of employees set out in the current framework law on craftsmanship will be subject to the same social security contribution rates as industrial enterprises of a similar size. Furthermore, the extension of the obligation for owners and partners to register with the Special Artisans’ Fund (IVS) will result in an increase in contribution revenue. Moreover, the reform does not create any ‘grey area’ between the craft sector and industry. Contrary to Confindustria’s claims, businesses will have no discretion in choosing whether or not to be classified as craft enterprises, depending on their own interests – which, in any case, are non-existent. In fact, registration in the Register of Craft Enterprises is mandatory in all cases where a business meets the relevant criteria.

Furthermore, the increase in the threshold to 49 employees does not apply to all types of craft businesses, but only to those in the arts and traditional crafts sector, whilst the current differentiation in the maximum number of employees based on the activity carried out is maintained, with a proportional increase in staff numbers.

The alarm over wage dumping or the erosion of protections for an alleged 1.8 million workers is also unfounded. It is well known, in fact, that the legal classification of a ‘craft enterprise’ does not oblige the company to apply a specific collective agreement: a craft enterprise may apply industrial collective agreements and vice versa. This is a situation that already exists in Italy today. In fact, almost all the collective agreements signed by craft organisations are applied well beyond the limits of the 1985 Framework Law on Craft Enterprises. There will therefore be no direct or indirect impact on workers’ wages or on the resulting tax burden. As for employment, it can only be boosted, given that the reform aims to remove the ‘bottleneck’ to employment growth for all those firms that currently risk having to choose between taking on one more employee and losing their legal status as an artisan enterprise.

More generally, the need to revise the current framework law – which is a full 40 years old – as also highlighted by the President of the Republic at the 2024 annual general meeting of Confartigianato, is necessary to enable craft businesses to navigate a constantly evolving market and the major economic and social transformations of our time. In other words, according to Confartigianato, craft enterprise should not be a ‘cage’, but rather a status based on the pre-eminence of the value of work and the entrepreneur’s skills, guaranteed and protected by Article 45 of the Constitution. After all, one need only look beyond our national borders. In countries such as France and Germany, the artisan nature of a business does not limit its size: it is possible to be an artisan whilst employing dozens or even hundreds of staff.

If we all care about the competitiveness of the Italian manufacturing sector, and given that the reform does not provide for preferential treatment that distorts competition between businesses nor for reduced revenue for the public purse, whose interests are served by keeping the craft sector confined within size limits that stifle its growth? One is led to wonder, in short, what exactly is the problem? What is the real reason for such concern on the part of Confindustria? Perhaps competition at the trade association level? In this regard, we are convinced that, as always, it will be the companies themselves that freely decide who best represents and protects their interests, regardless of the reform of the framework law on the craft sector.

Marco Granelli

President of Confartigianato

Lecornu’s plan to reduce the deficit excludes across-the-board tax increases. Firstly, the aim is to keep spending at 2026 levels, except for interest on the national debt and defence spending, and to cut funding for ministries and agencies. Secondly, the plan is to make changes to social security (healthcare, basic pensions and child benefits), aiming to cut its annual deficit from 22 billion in 2026 to 12–13 billion in 2027. The government is also proposing not to increase the index point – the figure used to calculate public sector salaries, which has been frozen since 2023. To achieve savings of €4.1 billion in the social security budget, Labour Minister Jean-Pierre Farandou clarified yesterday that only pensions up to €1,260 per month would be fully adjusted for inflation, while higher pensions would see smaller increases. A further €9 billion of the €54 billion in savings is expected to come from measures already introduced this year.

With Renaissance, the MoDem, Horizons and Les Républicains, the government has just over 200 MPs out of 577, so it does not have a majority. On the 2026 budget, which was only approved in February, Lecornu was saved by the Socialist Party in exchange for scrapping the 2023 pension reform, which would have gradually raised the minimum retirement age from 62 to 64; thus, ten days ago, the Prime Minister wrote to Socialist MPs to propose a new compromise on the budget. The Socialists are calling for a tax on large inheritances, something Lecornu’s government rules out, and on 27 September, Secretary Olivier Faure, who is standing in the presidential primaries, stated that “if nothing changes (compared to the current proposal, ed.), we will vote for a motion of no confidence”. Jean-Luc Mélenchon’s La France insoumise will vote for a motion of no confidence in the government in any case and, to balance the public finances, has even proposed writing off a fifth of France’s debt. Marine Le Pen, leader of the Rassemblement National (RN), has said that an imperfect budget is better than no budget at all – given that she could amend it if elected – but that she will vote against it if pensions are not adjusted for inflation. On 17 September, Lecornu promised not to invoke Article 49.3 of the Constitution, under which the budget is deemed approved without a vote by MPs unless the National Assembly passes a vote of no confidence, provided the parties refrain from filibustering. However, on 28 September, the Minister for Relations with Parliament, Laurent Panifous, described approval by a vote as “very difficult” and did not rule out the use of Article 49.3. In short, to get the budget approved, Lecornu will need either Le Pen or the Socialists: in an ordinary vote, where abstentions are not counted, it would be enough for RN to abstain for him to prevail against the ‘no’ votes from the left; under Article 49.3, it would be enough for one of the two not to vote in favour of the motion of no confidence. Otherwise, there is the ‘loi spéciale’, used last year, which would allow the state to enter 2027 with the capacity to finance essential expenditure (according to the Treasury, this would increase the deficit by half a percentage point of GDP).

Meanwhile, yesterday the yield on French 10-year bonds exceeded 4.8 per cent, the highest since 2008. According to Reuters, this reflects doubts about France’s public finances and political stability, whilst for Luis Garicano, an economist at the LSE and director of the Rhine Group, the proposal to write off the debt plays a major role: “This absurd debate has undermined both France’s credibility and the ECB’s room for manoeuvre, because the TPI (editor’s note: the instrument through which the ECB can buy a country’s bonds if its spread rises without economic justification) only counteracts ‘unjustified and disorderly’ market dynamics. But higher yields for countries that might not wish to pay their debts are not unjustified,” he added. The Governor of the Banque de France, Emmanuel Moulin, reiterated that the means to correct the deficit lie in the hands of the government and parliament. Today, Lecornu will present the plan.

Testa and Zollino’s argument is divided into two parts: the first deals with the energy context in general, whilst the second focuses on nuclear power and Italy. This division serves to ensure a rigorous approach. The authors begin by addressing the global energy issue: as the global population and per capita income grow, ever-increasing amounts of energy will be required. However, the threat of climate change imposes a constraint: while they acknowledge that fossil fuels will remain essential for some time to come, their use must be limited as much as possible. To achieve this objective, two strategies must be pursued simultaneously: on the one hand, the electrification of consumption, that is, the gradual replacement of existing technologies (for example, with electric cars or heat pumps). The other challenge is to generate ever more electricity from emission-free sources, thereby reducing and ultimately eliminating (or almost eliminating) the role of fossil fuels. This explains the focus on renewables, which have seen spectacular growth in recent years, and on nuclear power, which remains one of the most important low-carbon sources globally. Of course, the situation in developing countries – characterised by rapid economic growth and rising energy consumption – differs from that in industrialised nations, where consumption and emissions have long since stopped rising; yet there is a clear interest in finding common solutions, and it falls primarily to the most prosperous economies to invest in the research and development of clean alternatives.

This is where the second half of the discussion begins, which takes a closer look at our country. Testa and Zollino adopt a secular approach: although their positions are well known, they strive not to take sides and to base their opinions on the facts, not the other way round. Moreover, there is an autobiographical element to this journey: both admit to having voted against nuclear power in the 1987 referendum, but to having changed their minds after examining the issue in greater depth in the years that followed. After outlining the characteristics of nuclear power stations and discussing their historical safety record, they present the results of various scenarios. The book focuses on Italy: it analyses the characteristics of our energy system and applies various scenarios. To do so, it takes stylised examples – such as the installation of a data centre in Lombardy or in Puglia – and assesses what would change if, in one case, only renewable sources (wind and solar) were used, and in the other, a mix of renewables and nuclear (alongside a variable proportion of gas). Furthermore, they show how the scenarios change as natural gas prices fluctuate. Since renewable energy production varies with the seasons and is not entirely predictable, the more we accelerate the transition, the more necessary it becomes to oversize the system, upgrade the grids and add storage systems. The authors also consider the cost of nuclear power over the entire life cycle of the plants, showing how the weight of the initial investment affects the comparison with other technologies depending on the time horizon considered.

Testa and Zollino do not dispute that, in theory, wind or solar power are cheaper than nuclear power, but this is only true ‘if we compare each technology individually, disregarding variability, seasonality and the simultaneous nature of generation’. Consumers want energy when they need it, not when weather conditions allow: therefore, we must focus on the system as a whole, not on the individual sources that contribute to supplying the required power. The total cost of electricity, in other words, does not correspond to the average cost of production of the individual technologies, but includes the expenditure required to have energy at a specific time and in a specific place. And this depends not only on generation plants, but also on energy transmission infrastructure, batteries and any incentives. This is why “variability, seasonality and simultaneity take on enormous significance”. The conclusion is that it would be wrong to think we can solve all our problems with a single technology (or by using only some and excluding others). Nuclear power can make a vital contribution to minimising costs and reducing emissions: Testa and Zollino do not see nuclear power as some mythical ‘silver bullet’, but – as the book’s title suggests – as the missing piece in a jigsaw puzzle that is already complicated enough, without us making it impossible in the name of some prejudice.

In practical terms, Poste will have full visibility over TIM’s main activities and initiatives and will be involved at an early stage in the assessment of operations of major strategic importance. The stated aim is to coordinate industrial policies, integrate expertise, infrastructure and technologies, and develop synergies, whilst maintaining the legal autonomy of TIM and its subsidiaries, not least to protect minority shareholders. For the time being, the composition of TIM’s board of directors remains unchanged, and Pietro Labriola is expected to remain at the helm of the company during the initial phase of the integration. On the stock market, TIM’s share price fell by 2.6 per cent. Poste’s share price rose by 1.04 per cent.

According to the document, inflation in energy prices is also accelerating, rising overall from +17.1 per cent to +22.3 per cent year-on-year. The sector therefore remains a key factor in changes to the cost of living, as recently acknowledged by the European Union. Also significant is the rise in prices of unprocessed food products, which rose from +3.8 per cent to +5.5 per cent, whilst those of processed food products continued to fall, albeit less sharply, from -0.4 per cent to -0.3 per cent.

Both goods and services are accelerating, but at different rates: prices for goods have risen from +4.1 per cent to +5.4 per cent year-on-year, whilst those for services have increased from +2.4 per cent to +2.6 per cent. The gap between the services and goods sectors is therefore widening, rising from -1.7 to -2.8 percentage points. Among the services showing an acceleration, transport services stand out, rising from +0.8 per cent to +1.6 per cent, as do recreational, cultural and personal care services, rising from +2.6 per cent to +2.9 per cent.

According to provisional data, the national consumer price index for the entire population (NIC), excluding tobacco, shows a month-on-month increase of +0.7 per cent and a year-on-year increase of +4.2 per cent, up from +3.3 per cent in the previous month. The Harmonised Index of Consumer Prices (HICP), on the other hand, recorded a monthly increase of +2.0 per cent – due to the end of the summer sales, which the NIC does not take into account – and a year-on-year increase of +4.1 per cent, compared with +3.2 per cent in the previous month.

Overall, year-on-year inflation rose to +4.2 per cent from +3.3 per cent in August. The projected inflation rate for 2026, however, rose to +3.1 per cent for the headline index and remained stable at +1.9 per cent for the core component, calculated excluding unprocessed food and energy.

Based on this analysis, covering the period from 1996 to 2025, the Parliamentary Budget Office (UPB), which gave evidence yesterday in the Chamber of Deputies on policy levers to support Italian growth, stated that to mitigate the impact of demographic decline, it will be “crucial to boost investment in innovation and productivity”. In summary, according to the UPB, productivity and investments aimed at increasing it will play a crucial role.

According to the latest Istat forecasts from August, by 2050 the workforce aged between 15 and 64 will fall from 24.8 million (in 2025) to 21.4 million – a reduction of approximately 3.4 million people of working age over 25 years. If the contribution from the workforce declines, then a larger share of economic growth will have to come from an increase in value added per hour worked. However, the problem is that productivity grew by only around 9 per cent between 1996 and 2025, with significant differences between sectors. It has risen particularly in the most innovative and high-tech sectors: in the pharmaceutical sector, one hour of work last year generated two and a half times the value added per hour worked produced in 1995, whilst in the manufacture of computers and electronics it was around 70 per cent higher than thirty years earlier. On the other hand, productivity has fallen in sectors that are more heavily regulated or protected from competition: it fell by almost 30 per cent in accommodation and food services between 1995 and 2025; in administrative activities, it fell by almost 40 per cent; and in services such as water supply and waste management, it fell by 60 per cent. As for output by sector, education recorded a sharp decline, reflecting the demographic decline, whilst traditional manufacturing sectors such as textiles suffered significant contractions, partly due to competition from emerging economies.

According to projections presented yesterday by the UPB, potential GDP growth – that is, how much the economy can produce with the resources available – will fall to almost zero around 2034 (when the contribution from the workforce will turn negative). To reverse the trend in productivity, investment in innovation would be needed, but according to the UPB, Italian businesses are still investing too little in machinery and technology, precisely at a time when the dual transition – green and digital – requires the opposite. Since 2016, the government has attempted to boost investment, initially through the tax incentives of the Industry 4.0 plan, alternating between two measures: until 2019, through increased depreciation allowances – that is, a deduction from taxable income exceeding the cost of the asset, available only to those with sufficient profits; and from 2020 to 2025, through a tax credit, which can be used to pay taxes and social security contributions even by loss-making firms. According to the UPB, on the one hand, the incentives have boosted investment and employment among beneficiary firms, with more pronounced effects in the case of the tax credit, which has also reached small businesses and the South; on the other hand, however, the recovery in investment ‘does not appear to be taking hold’.

With last year’s budget, the government reintroduced hyper-depreciation until September 2028. This decision spreads the burden on the public finances over time, but the UPB considers it less effective because the benefit is delayed, is contingent on profits, and risks rewarding companies that ‘would have made investments even without the incentive’. In other words, the state has prioritised the instrument that is easiest to manage from a budgetary perspective, but which the UPB considers less effective precisely in terms of the lever on which the possibility of breaking out of the cycle of low growth and low productivity depends.

Competition is not just about price: it is also about innovation and service. And it is likely that the current economic climate will open up potentially new scenarios. Yesterday’s newspapers showed the rush on Eni petrol stations, with long queues to fill up and stocks running low. This suggests that, alongside those customers for whom saving money is more important than the time spent waiting or searching for a station that is still open, there are others willing to spend a little more to skip the queue. In a sense, the move implemented by Eni, Ip and Q8 splits the market in two: those who value time more highly and those who prefer to minimise their expenditure. Competition demands ingenuity and dynamism; it is almost never kind to those who fail to grasp changes or keep pace. The initiative of a voluntary price cap on retail prices is a response to extraordinary circumstances: even independent operators must understand the reasons behind it and, if they cannot beat the multinationals at their own game, seek a different competitive edge.

But what does this text contain that is so toxic as to jeopardise relations between Meloni and Orsini? The aim is to modernise the regulations and give craft businesses the opportunity to expand. Not, however, through support and a roadmap enabling them to mature in the market and increase productivity, but rather with a simple stroke of the pen. A business may be classified as a craft enterprise even if it has 50 employees (previously, depending on the sector, the limit ranged between 18 and 32); more flexible company structures may be adopted; the owner is not obliged to work in the business themselves; and businesses may have up to three premises. For Confindustria, this constitutes a veritable encroachment on the territory of small-scale industry; the law creates a ‘grey area’ in which a business is considered industrial when it competes in the market and becomes an artisan enterprise when it has to bear costs and fulfil obligations. In short, this is a law that does not help businesses grow but instead extends benefits and concessions to those small enterprises that wish to define themselves as ‘artisan’ for convenience’s sake. Economists once described this as the ‘low road’ to competitiveness, and it seems that Urso has chosen it and Meloni has endorsed it.

The Confindustria representatives’ accusations do not stop there. Orsini claims that this new measure will result in a shortfall of 800 million in INPS revenue, a reduction in personal income tax (IRPEF) revenue of 250–400 million, and, above all, that more than 1.5 million workers are at risk of a potential change to their national collective agreement. According to figures released by the vice-president of Confindustria, Francesco Somma, the pay gap between industrial contracts and those for craft tradespeople is as high as 34 per cent. Orsini’s fear, therefore, is that this will trigger a downward migration of companies – perhaps even those registered with Confindustria – which, to save on labour costs, will masquerade as craft businesses. Meloni is well aware of these concerns, but at the moment she considers it a priority to help the artisans’ associations—which are facing some difficulties—to attract as many new members as possible. This is Fratelli d’Italia’s industrial policy: the smaller the businesses remain, the more they will need us. Large companies, on the other hand, are so cosmopolitan that they look elsewhere. It is clear that the current dispute between the government and Confindustria is no trivial matter. It touches on many issues, affects numerous organisational and budgetary interests, and makes any prospect of a social pact dependent on electoral approval.

Furthermore, there is also the risk that the talks between businesses and trade unions – which are intended to produce new and more transparent rules on representation – could run aground on what is known in the trade as ‘perimetrazione’, namely the very boundaries between craft businesses and small-scale industry. The talks – which were launched with the Prime Minister’s backing – could face insurmountable obstacles or could lead to an agreement that is not, however, endorsed by the craft trade associations. And the trade unions? They are focused on a positive outcome from these talks and, for the time being, have not devoted much time to the reform of the craft sector. There has been no public statement on the matter; a silence prevails even within the CGIL, led by a rather talkative leader. Yet it should be clear to their leaders that if the government’s bill were to pass, we would face a massive wave of contractual dumping. In short, instead of increasing wages, we would be reducing them. Orsini, who is a born tactician, fears a head-on clash with Palazzo Chigi and a personal confrontation with Giorgia Meloni. At this stage, he is sending in the regional troops, particularly those from Piedmont, who have launched a barrage of criticism against the Urso-Granelli bill. However, this war of attrition cannot continue indefinitely: either Meloni backtracks (perhaps by shifting the blame onto Urso), or Orsini risks a great deal and will have to mobilise the regional branches – this time not to draft a press release but to prevent that exodus towards the craft sector, which would mark an unprecedented setback.

Yet this approach resembles seeing the speck in someone else’s eye while overlooking the log in one’s own. Debating a few billion more or less to be spent risks obscuring the far more significant change that has taken place in the international macroeconomic landscape. With public debt standing at 137 per cent of GDP, Italy’s budgetary constraints are now much tighter, not so much because of pressure from Brussels but because market conditions have changed profoundly.

For over a decade, we have become accustomed to very low inflation, interest rates close to zero and central banks acting as major buyers of government bonds. Under those conditions, even high levels of debt seemed relatively easy to manage. Today, this is no longer the case. Inflation has not yet returned to target on a stable basis in many countries; interest rates are higher; central banks are reducing their bond portfolios; and the major investment cycle linked to artificial intelligence is competing with governments for available savings. At the same time, the gross public debt of advanced economies has risen to nearly 110 per cent of GDP, compared with around 70 per cent in the early 2000s. In September, the median yield on 10-year government bonds in advanced economies exceeded 4 per cent, around five times the average for 2015–21. Higher debt levels are now meeting higher interest rates. And the long end of the yield curve has become more volatile.

For Italy, this matters a great deal. Debt stood at 137.1 per cent at the end of 2025, and the European Commission forecasts it will rise to 139.2 per cent in 2027. The higher cost of borrowing is not immediately passed on to the entire debt stock, as the average remaining maturity of the debt is long – around 7.9 years. However, nearly 600 billion, about a fifth of the total, has a residual maturity of less than one year and will therefore have to be refinanced at prevailing market rates. Interest expenditure stands at 3.9 per cent of GDP in 2025, the second highest in the G7 after that of the United States.

The Economist reports that if all the debt were to be refinanced today at current five-year yields, the UK would need a primary surplus of 1.5 per cent of GDP just to stabilise its debt-to-GDP ratio. Italy would follow closely behind, at 1.4 per cent, ahead of France (1.2 per cent) and the United States (1 per cent). It is a purely hypothetical scenario, but it clearly illustrates how much the arithmetic of debt has changed compared with the years of zero interest rates. Yet we often continue to talk about the fiscal constraint as if it were primarily a European rule. The 3 per cent figure is a rule. A debt-to-GDP ratio of 137 per cent and the rate at which investors are willing to refinance it are economic constraints in their own right.

Reducing a debt of this magnitude is neither simple nor quick. It takes years, a credible strategy and, above all, economic growth. The solution cannot be to seek growth through yet another permanent expansion of debt-financed public spending. That would amount to trying to solve the debt problem by taking on more debt. In 2025, public sector spending stood at around 51 per cent of GDP, compared with around 47 per cent twenty years ago. So much for the much-vaunted austerity. The decisive factor is potential growth: productivity, private investment, human capital, competition, the size of businesses and the functioning of institutions. As we often repeat in these columns, genuine supply-side policies are needed – policies that increase the country’s capacity to produce without having to continually prop up demand with new deficits.

This is also why the issue should feature in the upcoming election campaign. As always, promises of new spending or tax cuts are beginning to emerge, whilst the funding arrangements tend to be far less visible. Alongside the tables listing what is promised to be distributed, it would be useful to publish another: debt-to-GDP ratio, primary balance and projected growth for the next five years, together with the measures intended to achieve it.

It is a much less popular table than the one showing bonuses. But, ultimately, it is the one that needs to be included.

Applying the new inflation forecasts to the available tax returns yields a significant result. In the Bank of Italy’s baseline scenario, with cumulative inflation of 5.2 per cent in 2026 and 2027, the fiscal drag amounts to 8.11 billion: 5.76 on employees and 2.35 on pensioners. With inflation at 6 per cent (adverse scenario), revenue would rise to 9.35 billion; at 8.2 per cent (severe scenario), it would reach 12.74 billion. These are conservative estimates, as they do not include regional and local surcharges.

But gross fiscal drag is one thing; the additional resources that can provide further scope for a Budget Bill are quite another. Even with inflation close to 2 per cent, the tax system inherently generates fiscal drag. In our calculations, we take approximately 4.7 billion in ‘natural’ fiscal drag as a reference. This forms the basis included in the trend figures and cannot be counted as extra revenue.

The truly interesting figures are therefore those net of that 4.7 billion in inherent fiscal drag. In the base-case scenario, of the total 8.11 billion, around 3.4 billion represents additional revenue. With inflation at 6 per cent, this rises to 4.6 billion. In the most severe scenario, the figure reaches around 8 billion. This is the potential fiscal ‘dividend’ from inflation.

This distinction is even more important under the new European rules. The Stability Pact now monitors net expenditure trends and excludes, amongst other things, the effect of discretionary measures on revenue. The European Commission regards the increased revenue from fiscal drag as a discretionary fiscal policy measure (equivalent to a tax rate increase), which therefore allows greater scope for growth in public spending. This means that fiscal drag could be an important source of funding for the 2027 Budget Bill.

It is only an apparent paradox. The government can announce a reduction in tax rates whilst at the same time collecting billions more because inflation pushes nominal incomes into higher tax brackets and reduces the real value of tax allowances. The tax burden can increase without Parliament having voted for an explicit tax rise. When inflation was low, the problem was almost invisible. Following the shock of recent years, this is no longer the case. If purely nominal increases in incomes are not to automatically translate into tax increases, then the issue is not merely how to deal with the extraordinary fiscal drag, but whether to neutralise the mechanism at its root.

The approach the government is discussing is much more limited in scope: extending the benefit of the 33 per cent personal income tax rate up to 60,000 euros, by adjusting the tax bracket between 50,000 and 60,000 euros. However, compared with fiscal drag, this is only a partial, one-off compensation: it gives something back to a section of taxpayers, without altering the mechanism that generates the annual tax drain.

There is also a political issue. Concentrating the tax relief between 50,000 and 60,000 euros exposes the government to criticism that it is channelling the few available resources towards middle-to-high earners. A reduction limited to that bracket produces concentrated benefits, whilst the fiscal drag affects a much broader section of the income distribution.

The alternative is more general: to index, either entirely or at least to a large extent, tax brackets and allowances to inflation. It would no longer be a matter of deciding each year who to ‘cut taxes for’, but of establishing that a purely nominal increase in income should not be taxed as if it were a real increase. Of course, this would come at a cost: it would mean foregoing not only the additional 3.4 billion in the baseline scenario, but also the inherent fiscal drag that currently factors into the trend figures.

This is the real crux of the forthcoming budget. Even before discussing how to spend the fiscal drag, we must decide to what extent it is legitimate to continue treating it as an ordinary source of state funding. In the base-case scenario, between the structural and additional components, over 8 billion is at stake. When an automatic tax reaches this scale, it becomes difficult to continue treating it as if it did not exist.

Any restriction on vehicle traffic leads to a reduction in emissions and, consequently, an improvement in air quality. The most effective measure in this regard would be to ban the use of all vehicles from tomorrow: cars, lorries, buses, trams, trains and even underground trains (in older underground trains, the air quality is much worse than outside). Pollution levels could then be reduced even further by halting all industrial activity, energy production and agricultural work, and by switching off heating systems. Pollution would not be eliminated entirely – there would still be pollution caused by natural phenomena such as Saharan sand, which occasionally reaches us and causes concentrations of fine particulate matter to rise – but it could be said that everything possible has been done to minimise the impact of our activities on health.

But would that even be a desirable goal? Even simple common sense tells us it is not. The economic and human consequences of a total ban on transport, and the unavailability of fossil fuels and heating and air-conditioning systems, would have a far more negative impact than the benefit derived from improved air quality (which is already much better today than in the past). There is no such thing as a free lunch – or even clean air. Like all other forms of regulation and public spending, measures concerning environmental impact should only be adopted if the benefits outweigh the costs. This applies just as much to a hypothetical total lockdown as it does to partial measures such as the one postponed for a year.

What is the impact of a Euro 5 car in terms of air pollution? According to estimates from the European Commission’s Handbook on the External Costs of Transport, for every kilometre travelled, a person causes monetary damage amounting to 1.04 euro cents. This figure is 85 per cent lower than that of a Euro 0 car. The figure for a Euro 6 car, which is permitted on the roads, is 0.86 cents. This is a minimal difference – less than two thousandths of a euro – which does not justify the ban: the cost imposed on those affected (the need to change vehicles or longer journey times) is far greater than the benefit gained. Society as a whole therefore suffers a net loss. We can draw the same conclusion if we consider the fact that fuel taxation already more than internalises this and other environmental externalities (such as noise and CO₂ emissions). The ‘polluter pays’ principle – which is fair and efficient, and supported by the European Union itself – is already fully applied. Further policies, such as driving bans, incentives for the purchase of new vehicles or subsidies for public transport, are therefore not justified in terms of environmental sustainability (the subsidy may be justified, but it is not, in any case, the optimal solution for reducing congestion).

The government’s decision is therefore positive, but not a definitive solution. The measures restricting traffic stem from the a priori setting of identical maximum pollution limits for every area of the European Union. A uniform target is set without taking into account that the costs involved in achieving it vary greatly from one region to another: due to unfavourable conditions for the dispersion of pollutants, a much greater effort is required to achieve air quality in the Po Valley that is identical to that in other areas.

If no action is taken on this front, we will find ourselves facing the same situation in the years to come, when restrictions even stricter than the current ones come into force.

"I would like to thank Kuwait and the group that controls the Q8 petrol stations in Italy for responding to the Italian government’s appeal to energy companies to cap fuel prices. Following the decision by Eni and Socar, today Q8 has sent another important signal of its commitment to Italian households," commented Prime Minister Giorgia Meloni. Already yesterday evening, Palazzo Chigi had indicated that negotiations with the group were at an advanced stage and close to being finalised. The price cap, the company states, will last for 30 days from 1 October. “The price cap will be applied using a modular approach, consistent with the different circumstances within the company’s distribution network. Q8 Italia will provide appropriate support to operators and partners to ensure the economic sustainability of the entire supply chain,” the statement reads.

The government’s satisfaction is also reflected in the words of Deputy Prime Minister Antonio Tajani, who wrote on social media: “Yet another result stemming from our political and diplomatic efforts. The Government continues to work to resolve the real problems faced by citizens.”

The discount will be rolled out to petrol stations gradually, as was the case with IP. According to figures from Staffetta Quotidiana, by yesterday afternoon over 90 per cent of Eni/Enilive-branded petrol stations had adjusted their prices to the ‘cap’ of 1.99 euros per litre for petrol and 2.19 euros per litre for diesel. For IP, there were around 600 outlets with prices capped at the same level yesterday, with the prospect of this figure rising to 2,000 within a couple of days. Just under a fifth of outlets in the Italian fuel network therefore currently have a price ‘cap’: over 4,100 stations out of a total of just under 22,000. This number is set to rise in the coming days. 

Meanwhile, according to the Ministry’s figures, this morning the average price of self-service fuel across the national road network stands at 2.126 euros per litre for petrol and 2.335 euros per litre for diesel.

In 2025, corporate revenues returned to growth after two years of decline, albeit by just 0.5 per cent compared with 2024 and mainly thanks to exports. Despite the shockwave caused by tariffs, exports rose by 3.3 per cent, whilst domestic sales in Italy fell by 1 per cent. Overall, the manufacturing sector outperformed the average: revenues rose by 1.7 per cent (+2.9 per cent for overseas sales and +0.3 per cent domestically). Compared with 2016, revenues have risen by 39.6 per cent in nominal terms over the past ten years, against cumulative inflation of 21.4 per cent over the same period, and different sectors have followed varying trends: the automotive sector, for example, saw its revenues fall by 8.4 per cent, whilst shipyards more than doubled theirs.

As for corporate margins, research by Mediobanca’s Research Department indicates that in 2025, for every 100 euros of revenue, companies retained an average of 6.7 euros in operating profit, the same as in 2024 and above the average of 5.6 euros recorded between 2016 and 2022. Also in 2025, the 1,700 companies that took part in the survey invested 35.5 billion euros in plant, machinery and buildings: at constant prices, this was the highest level since 2016. In this regard, the manufacturing sector recorded €25.7 billion in investment, whilst investment in the services sector remained at €9.9 billion. Companies did not take on more debt than usual: their debts to banks and bondholders amounted to 73.8 per cent of their assets in 2025, compared with an average of 78.9 per cent between 2016 and 2024. The number of employees also rose by 1.3 per cent in 2025 compared with 2024 and by 11.8 per cent over the decade. However, according to data collected by Mediobanca, the growth over the decade came entirely from private companies, which increased their workforce by 16.3 per cent, whilst those controlled by public bodies reduced theirs by 4.9 per cent.

Mediobanca also calculates the residual value remaining to companies after all parties involved in the business have been remunerated, including equity holders, and after all costs have been paid: between 2016 and 2025, this averaged 9,300 euros per year per employee. Over the same ten-year period, however, labour costs per employee – that is, gross salary and social security contributions – rose by 18.8 per cent, which is less than the increase in productivity, which grew by 22.6 per cent. Adjusted for inflation (21.4 per cent, cumulative), in 2025 an employee cost businesses 2.2 per cent less than in 2016. Mediobanca describes this trend as “disappointing in real terms” and calculates what would be needed to close the gap with the real wages of 2021: in 2025, the average cost per employee should have been around 71,500 euros instead of 67,300, i.e. around 4,200 euros more.

In any case, data compiled by other institutions show that contract renewals have not been sufficient to offset the price rises of 2022 and 2023. One example is the Bank of Italy, which in January 2026 (or, more recently, the OECD) noted in its economic bulletin that contractual wages in November 2025 were still 7.7 per cent below those of January 2021 in real terms, attributing the shortfall to slower contract renewals and the less widespread use of inflation-adjustment clauses.

According to many analysts, her speech marked a change of tone. Healey, who served as Defence Secretary in Keir Starmer’s government until June – when she resigned, accusing the Treasury (which she now heads) of failing to allocate the necessary resources to the armed forces – is, following two months of announcements by Burnham, beginning to lay the groundwork for difficult decisions. “The funds that New Labour had in the 1990s simply no longer exist,” Healey said yesterday. “And there is nothing progressive about losing control of the accounts.” UK debt now stands at 93.8 per cent of GDP; in 1997 it was 37.2 per cent; and interest payments currently amount to around 3.6 per cent of GDP. Nevertheless, the Chancellor has promised a “new era of industrialisation”: £6 billion in contracts for shipyards; £100 million for a workplace apprenticeship scheme run by mayors; and the announcement of a £300 million investment by Rolls-Royce in the UK. As for how the planned expenditure – such as the £4.7 billion for the already approved defence programme – will be funded, the Chancellor has not yet revealed his hand.

At the same time, Healey gave assurances that the budget would comply with the rule stipulating that, by 2029–30, revenue must cover all current expenditure – from pensions to interest payments – whilst debt may only be used to finance investment. In March, official forecasts predicted a surplus over current expenditure of £23.6 billion for 2030, but with the rising cost of debt, the margin has fallen to between 8 and 12 billion, according to KPMG and the Resolution Foundation. On 28 October, Healey will have to reconcile Burnham’s pledges with the budget, and according to Bloomberg, the Treasury is considering an increase in the tax on capital gains from the sale of shares and a one-off levy on banks and oil companies.

The PD, M5S, AVS, IV, +E and other groups such as Progetto Civico (led by Onorato) and Più Uno (led by Ruffini) are clear on one point: following the experience of 2022, when the current centre-left presented itself to voters as split into three factions, thereby handing victory to the centre-right, unity is not only the most important thing but the only thing that matters. Although the scope of the coalition has not yet been defined – such as how many parties it will comprise, who the prime ministerial candidate will be, and what the programme will entail – it is certain that they will all stand united. The issue of Ukraine – and therefore whether or not to continue military aid to Kyiv, with Conte said to be certain it should not and Schlein convinced it should – is not, however, considered a decisive factor. An agreement will be reached, a compromise, a formula vague enough to mean that weapons may or may not be sent.

When it comes to economic policy, the deficit is what unites all the parties and their wish lists. Giuseppe Conte wants to give €15,000 to everyone turning 18, Elly Schlein wants to raise healthcare spending to 7 per cent of GDP, Matteo Renzi wants to allocate 2 per cent of GDP to increase salaries, and AVS wants to halt the rise in the state pension age. There is something for everyone. However, no indication is given as to how these measures will be funded: there is no agreement on a wealth tax; some believe the ‘tax on windfall profits’ can finance the entire wish list; others fall back on the usual ‘crackdown on tax evasion’; and still others are pinning their hopes on artificial intelligence (ChatGPT will find the money).

Although we have never seen a centre-left so fragmented – for even in the days of Romano Prodi’s motley Union, there were certainties regarding leadership, budgetary policy and international positioning (those dissenting on Afghanistan were numerically a tiny minority) – this undefined coalition has a good chance of prevailing. According to the majority of opinion polls, this ‘Campo largo’ is a few points ahead of the centre-right led by Meloni, Salvini, Tajani and Lupi (the latest Ipsos poll for Corriere della Sera puts the centre-left at 42.7 per cent against the centre-right’s 40.2 per cent).

However, this advantage holds only if the centre-right leaves Futuro Nazionale out in the cold. Otherwise, with Vannacci in the coalition, the centre-right takes the lead. The progressive camp therefore bases its strategy on a certain degree of ‘irresponsibility’: for now, let’s all join forces to win, and then, once in government, we’ll decide what to do; and on the expectation that, conversely, Meloni will be very ‘responsible’, prioritising the common good (by avoiding electoral manoeuvres that would harm public finances) and her own convictions (by avoiding an alliance with those who wish to abandon Ukraine to Putin) over the temptation to bring Vannacci on board simply to gain one more vote than their opponents.

Let’s start with the concept of ‘fiscal drag’. This is a sort of invisible tax, resulting from the interaction between general price rises and the progressive tax system. In fact, if incomes rise in nominal terms to recoup the purchasing power eroded by inflation, and if, at the same time, the thresholds for income tax brackets and allowances are not updated, a larger proportion of one’s salary is taxed at higher marginal rates. In essence, real disposable income grows at a slower rate than gross nominal income: the tax burden increases and the state finds itself with additional revenue without having voted for any tax increase.

Fiscal drag is, of course, less pronounced when inflation is low and far more significant when it is high. It is no coincidence that this was a much-studied and widely discussed phenomenon in the 1970s and 1980s, which has only returned to the fore in recent years following the post-Covid and post-war surge in inflation in Ukraine. Normally, with an inflation rate in line with the ECB’s 2 per cent target, fiscal drag amounts to around 3 billion per year (3.2 billion following the Meloni government’s latest tax reform, which increased the progressivity of personal income tax). Meanwhile, following the years of high inflation in 2022–2023, the cumulative fiscal drag, according to calculations by Leonardi and Rizzo, amounted to around 25 billion euros, which the Meloni government used to implement a tax reform (a reduction in social security contributions, later incorporated into personal income tax, and a cut in tax rates) which more than offset the fiscal drag for low-to-middle incomes (below 35,000 euros per annum) whilst penalising middle-to-high incomes (above that threshold).

And now, how much does this fiscal drag amount to? Following the disappointment of a 3.1 per cent deficit in 2025, can the government build an election campaign around this and win the elections? Leonardi and Rizzo calculate, based on the latest estimates from the Bank of Italy – which forecasts cumulative inflation of 5.2 per cent in its baseline scenario (3.1 per cent in 2026 and 2 per cent in 2027) – that the fiscal drag will amount to 8.1 billion. In an adverse scenario, which assumes a rise in energy prices, cumulative inflation over the two-year period would rise to 6 per cent and the fiscal drag would be 9.3 billion. Whereas in a severe scenario – that is, with a 60 per cent increase in the price of oil and a 100 per cent increase in the price of gas compared with the baseline scenario – the fiscal drag would rise by 12.7 billion. This figure corresponds exactly to the 13 billion cited in the La Repubblica headline, which factors in cumulative inflation of 8.2 per cent: 4.4 per cent for 2026 (considered unrealistic at this stage of the year) and 3.8 per cent for 2027 (nearly double the baseline scenario).

But even taking these extreme scenarios into account, such a ‘windfall’ would never materialise. Because, as mentioned at the outset, there is a sort of underlying fiscal drag based on normal inflation (below 2 per cent, according to the ECB’s target). If we look at the tables in the October 2025 Draft Financial Plan (DPFP), the Minister for the Economy, Giancarlo Giorgetti – who obviously could not have foreseen the crisis in the Middle East and the closure of the Strait of Hormuz – drew up a Budget Bill forecasting cumulative inflation of 3.5 per cent over the two-year period 2026–27. This means that, for this two-year period, the public finance trends already incorporate around 5.5 billion in fiscal drag. Consequently, the Bank of Italy’s baseline scenario – with inflation of 3.1 per cent this year and 2 per cent next year – implies a total of around 2.6 billion in additional revenue for the two-year period 2026–27 compared with the ‘normal’ fiscal drag.

With 1.3 billion a year, Meloni and Giorgetti certainly cannot draft an electoral Budget Bill; at a push, they might be able to fund a partial abolition of the road tax on a first car (which costs around 2.4 billion each year). But this is neither a ‘hefty tax hike’ nor a ‘hidden windfall’.