Italy passes 2021 draft budget worth 40b euros

ROME - The Italian cabinet early on Sunday passed the 2021 draft budget, which includes an extension of the scheme to support workers in temporary layoff due to the coronavirus emergency.

Overall, the budget is worth some 40 billion euros ($46.8 billion), as the government heavily relies on stimulus measures to help the economy cope with the impact of the pandemic.

Originally scheduled to be expired by mid-November, the scheme allowing public funding for workers in temporary redundancy due to COVID-19 will be extended into some 18 weeks in 2021.

This operation will be covered with some 5 billion euros ($5.8 billion).

The cabinet also confirmed a 30-percent cut in social contribution payments for companies in the less-development southern regions that will make new hiring next year. This same tax break will apply for three years to firms with an employment under 35 across the whole country.

All of the companies benefitting from these COVID-related supportive measures -- worth about 5.7 billion euros -- would be prevented from making layoff. A separate cabinet provision will follow in the next days in order to make them immediately enforceable.

Another 4 billion euros is set aside for the productive sectors most affected by the coronavirus pandemic in Italy, such as tourism, catering, or cultural activities.

Four billion euros is allocated to the public health system next year, and will be partially used to confirm 30,000 doctors and nurses hired under fixed-term contracts in 2020.

Within such resources, some 400 million euros will be put aside in a specific fund for the purchase of vaccines against the coronavirus.

Among other measures, about 3 billion euros is allocated to financially support families with children, who would receive a single yearly payment (comprising all previous help measures) from July 2021 on. When fully operational, this provision would cost 6 billion euros, according to the cabinet's estimates.

At fiscal level, the 2021 budget introduces some changes in the current system, including a tax wedge cut for incomes above 28,000 euros at the cost of some 7 billion euros annually.

Public schools and universities will receive 1.2 billion euros for the recruitment of some 25,000 special needs teachers, and 1.5 billion euros for infrastructures.

Italy's gross domestic product (GDP) dropped by 13 percent in the second quarter of 2020 compared to the previous quarter, the National Institute of Statistics (ISTAT) stated. For the whole 2020, it is expected to contract by 8.3 percent due to the pandemic.

Yet, ISTAT forecast a 4.6-percent recovery in 2021.

The budget was drafted as the world is struggling to control the pandemic, with countries across the globe -- among them European Union (EU) member states, China, Russia, the United Kingdom and the United States racing to find a vaccine.

The 2021 budget will be sent to the European Commission for review, as it is due for all of the bloc's member states. The EU executive branch will assess the national budgets to see if they were consistent with European fiscal rules, and might suggest amendments.

After this passage, Italy's 2021 budget must receive final approval by the parliament by Dec 31.