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Italy reports surprise growth as new PM Meloni prepares budget

Italy's new government is now drawing up the 2023 budget, which is expected to include funds for an extended flat tax, help with energy costs, and stopping a retirement age rise.

Italy reports surprise growth as new PM Meloni prepares budget
Italian Prime Minister Giorgia Meloni has pledged to curb deficits despite making costly election promises. (Photo by Filippo MONTEFORTE / AFP)

Italy posted better-than-expected quarterly growth on Monday, a surprise bump for new Prime Minister Giorgia Meloni that staves off recession for now.

In its third quarter, gross domestic product (GDP) grew by 0.5 percent over the second quarter, compared to the expected slight decline.

READ ALSO: Italian government seeks to raise cash payment limit ‘to help the poor’

Nicola Nobile of Oxford Economics told AFP it was due to a surge in “household consumption, especially in services such as tourism”.

“But like other countries in the eurozone, Italy should enter a recession this winter in a context of rising interest rates and inflation,” he said.

The news comes at the right time for Meloni, whose first budget is due before the European Commission by the end of November.

On her first visit to Brussels on Thursday, where she will be received by European Commission President Ursula von der Leyen, Meloni is expected to pledge her willingness to curb deficits while maintaining the costly election promises of her right-wing coalition.

READ ALSO: Five key points from Meloni’s first speech as new Italian PM

The balancing act for Italy – the biggest beneficiary of the EU’s Covid recovery fund – comes against a global backdrop of rising interest rates, record inflation, the energy crisis and the war in Ukraine.

During the election campaign, Meloni repeatedly pledged not to increase Italy’s huge public deficit.

Still, while the previous Draghi government forecast a public deficit of 3.4 percent of GDP next year, Giorgia Meloni plans to increase that.

According to the Italian press, she is aiming for a deficit of 4.5 percent, or an additional 21 billion euros ($21 billion) to be financed by debt.

A large part of the budget is expected to be devoted to further measures aimed at mitigating soaring energy prices for businesses and households, though the new government hasn’t yet laid out what these will look like.

Italian Prime Minister Giorgia Meloni and Economy Minister Giancarlo Giorgetti are drawing up a budget plan which must be submitted to Brussels for approval by the end of November. (Photo by Alberto PIZZOLI / AFP)

At the helm is Economy Minister Giancarlo Giorgetti, who served as economic development minister under Draghi and is considered one of the more moderate members of Matteo Salvini’s far-right League party.

The coalition’s flagship measure – extending a 15 percent flat tax for the self-employed to those with annual incomes of 100,000 euros, instead of the current 65,000 – could be limited at first and then extended to other incomes. 

READ ALSO: Who is new Italian economy minister Giorgetti and what is he planning to do?

Funds must also be made available to lower the retirement age, which, in the absence of new measures, would automatically rise from 64 to 67 in 2023, as provided for in a 2011 reform.

Salvini has proposed recovering one billion euros with a six-month hiatus in Italy’s controversial basic income — a minimum payment which goes to Italy’s poorest, including the unemployed, those who cannot work because of disabilities or retirees who live under a basic income level.

Salvini’s contentious proposal to save cash is to stop payments to an estimated 900,000 people who are deemed capable of working but are unemployed.

But the last word will go to Giorgia Meloni. 

The challenge for the premier will be “to ensure the support of the League, while neutralising in part its leader” Salvini, who could undermine the “serious image” Meloni wants to put forward, said Credit Agricole analyst Sofia Tozy.

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PROPERTY

Where in Italy are house prices rising fastest?

Property values are expected to continue rising overall in Italy in 2023, but the situation looks much better in some cities than others. Here's how average prices compare.

Where in Italy are house prices rising fastest?

Until 2020 Italy’s real estate market had long suffered stagnation, weighed down by a large number of old, neglected properties which were proving difficult to sell.

But the pandemic turned Italy’s property market on its head, leading to the first increase in house prices for years at the end of the first quarter of 2020.

This trend has held up since, and industry experts cautiously predict further price growth in 2023 – albeit more modest than previously hoped.

Factors putting the brakes on growth include the soaring cost of living eroding households’ purchasing power, rising mortgage interest rates, the soaring cost of building materials, and a shrinking economy.

REVEALED: Where in Europe have house prices and rent costs increased the most?

Mortgages are also expected to become more difficult to obtain in 2023, meaning fewer people able to make a purchase.

But despite the gloomy picture overall, the outlook varies significantly around the country and some cities are expected to see a significant rise in prices this year.

Milan remains by far the most expensive major Italian city for a property purchase, but prices are rising faster elsewhere. Photo by Ron Dylewski on Unsplash

A recent report from Idealista Insights, the property search portal’s research team, looked at changes in the average prices per square metre in property listings in Italy’s biggest cities.

In 2022, the price per square metre “generally increased throughout the country, with ‘exclusive’ neighbourhoods becoming even more inaccessible to the average buyer,” the report found.

But, while bigger northern cities saw rising prices across the board, most southern cities were struggling with “stagnation”, it said.

Based on Idealista’s data, here are the ten most expensive cities to buy property in Italy, in order of the rate at which prices are rising.

  1. Genoa: the Ligurian capital is Italy’s tenth-most expensive city to live in – but prices here are rising faster than anywhere else on average, according to Idealista. An increase of 4.5 percent is forecast for Genoa in 2023, meaning the price per square metre will go from 1,602 to 1,674 euros.
  2. Bologna: Bologna records the second-highest price increase in Italy compared to 2022. The citywide average price per square metre will rise by an estimated 3.9 percent, reaching 3,419 euros.
  3. Verona: in seventh place we find the city of Romeo and Juliet, where the increase in prices is substantial, equal to 3.2 percent. The average cost will rise by around 80 euros per square metre, going from 2,483 to 2,563 euros per square metre.
  4. Milan: Italy’s economic capital will easily remain the most expensive city for property purchases, with prices set to rise by 2.9 percent compared to 2022. The average price per square metre is expected to exceed 5,300 euros, 150 more than now, with significant price variation between city districts.
  5. Bari: The capital of Puglia in the south-east is set to record an price increase of 2.8 percent, with the citywide average price per square metre going from 1,909 euros to 1,962 – making it the ninth most expensive Italian city in which to buy property and the only southern city to record a significant increase. 
  6. Turin: The northwestern city can expect an overall price increase of 1.5 percent, equal to around 30 euros more per square metre for a final price of 1,979 euros on average. 
  7. Florence: The Tuscan capital still has the second-highest prices, and can expect an average price increase of 1.4 percent, with the cost per square metre to rise from 4,128 to 4,184 euros .
  8. Rome: The capital may have some highly sought-after and expensive districts, but overall average prices will remain at around 3,336 euros, up slightly from 3,360 in 2022. This is equal to an increase of just 0.76 percent.
  9. Venice: La Serenissima remains the fifth-most expensive city to buy property again this year as the average price will remain almost unchanged with a reduction of -0.3 percent, meaning the cost per square metre will be around 3,090 euros.
  10. Naples: The southern capital is set to go against the trend, with a -1.5 percent drop in house prices expected. This means the average price per square metre will go from 2,737 to 2,696 euros, a difference of 41 euros.
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