The possible new government that will be formed as a result of the forthcoming elections in September has very generous plans. It is expected that after the showdown, a coalition of right-wing parties will win, where Giorgia Meloni from the nationalist “Brothers of Italy” will take over as prime minister of a neighboring country. The big test for her and her government will be both high public debt and close monitoring of developments by the European Union. The sudden removal of Mario Draghi as prime minister in July paved the way for the formation of yet another Italian government. An alliance between the Brothers of Italy, the Anti-Immigration League and former Prime Minister Silvio Berlusconi’s Forza Italia is expected to garner 49% of the vote in opinion polls, much higher than his divided rivals. Meloni’s party, rooted in post-war Italian neofascism, opposes Draghi’s program and has also questioned a united Europe in the past. He is expected to win 24% of the vote.

One of the top priorities in the partnership’s plans is to cut taxes to increase consumer spending. And while she has yet to officially release her manifesto, her plans include a flat tax rate of 15% for the self-employed with income up to €100,000 a year, up from €65,000 today. It’s manageable. A bolder plan to extend the measure to all employed and retired people would cut government revenues by almost 40 billion euros a year, or more than 2% of Italy’s GDP, according to economics professor Massimo Baldini. Such a prospect would make it difficult for Italy to reduce its public debt, which stands at 147% of GDP this year. In addition, Meloni’s formation aims to amend the €200 billion investment plan agreed by Rome and the European Commission to recover from the pandemic.

Reality could slow down the new government’s ambitious spending plans.

Indeed, the war in Ukraine now shows that more funds are needed for energy infrastructure, but any change needs the support of Brussels, jeopardizing the allocation of money vital to the revival of the Italian economy. In addition, Georgia Meloni advocates a more active participation of the state in the economic mechanism. And something similar has likely jeopardized concerted privatizations, such as those of Alitalia’s successor, ITA, as well as the old Monte dei Paschi di Siena bank.

However, Italy needs the help of investors to refinance its debt. Market concerns forced the previous anti-systemic prime minister to scale back his costly budget plans for 2018 and 2019. In addition, the European Central Bank said in July it would only intervene to support countries under speculative attacks if they comply with fiscal rules. EU and not make their public finances swell. On top of that, the rise in Italian bond yields, with the spread on German 10-year bonds doubling to 200 basis points per year, suggests that Italy cannot take the markets for granted. Such external pressure will test any radical approach to fiscal policy.