The Director General of Confindustria, Maurizio Tarquini, spoke in hearing at the Joint Budget Committees of the Chamber of Deputies and the Senate of the Republic on the State Budget for the financial year 2025 and the multiannual budget for the three-year period 2025-2027.

The Italian economy is in substantial stalemateRecent ISTAT data show zero growth in the last quarter, with industry contracting further and services growing moderately.

The disappointing economic performance in the summer leaves the change in GDP acquired for 2024 unchanged at +0.4%, making the +1% growth predicted by the government unlikely and the +0.8% growth estimated by leading forecasters, including our own Research Centre, difficult.

Of particular concern is the trend in industrial production, which has fallen by -7.4% over the past 24 monthsi.e. August 2024 on August 2022, recording a negative trend change for 19 consecutive months.

This evidence is part of a very weak Eurozone dynamics. It is no coincidence that the same word, 'stalemate', was used as recently as last Friday by President Lagarde to describe the health of the European economy. The euro area, from the end of 2019 to mid-2024, saw GDP growth of +3.4, compared to +10.7 in the US and +22.8 in China.

For Italy - but also for the rest of the EU - the German crisis is of particular concernbecause, as is well known, the interdependencies between the two economies are very strong. Let us recall that, despite the extensive diversification process carried out by Italian companies in recent years, exports to Germany account for almost 12% of total goods exported. However, Italian sales to Germany have been falling for two years: -5.6% in the first eight months of 2024 compared to the same period in 2023 and -7.2% overall compared to the same period in 2022.

Added to this are the additional constraints, this time of a regulatory nature, coming from Europe and mainly related to the Green Deal. Regulations such as the ETS, CBAM and the one on cutting emissions in the automotive sector are heavy factors of uncertainty. This is mainly because it is not clear if, and when, the inertia of the policies put in place by the previous Commission, which we consider to be correct in their objectives but too penalising in their declination, will be reversed.

This situation generates a risk that it is our duty to highlight: losing the production base, inducing companies, which today - much more than in the past - have no particular constraints on where to settle, to do so outside Italy, if not even outside Europe.

Losing the production base, due to relocations or business closures, is not a problem for industry alone, but for the country, because without industry there is no workbut also because, with it, the most vital component of our economy would be lost, the one that innovates and competes in international markets and contributes significantly to exports, to the positive trade balance and to our welfare system.

In this context, our wish was, and remains, for an incisive manoeuvrewith an industrial policy vision and a decisive impulse on investments, so as not to lose, but rather to consolidate, the momentum that the Italian economy has shown in recent years.

At the moment, however, the text that was the subject of the hearing, and which Confindustria hopes will be improved during the parliamentary process, does not offer adequate answers to the problems and risks outlined above. And this is mainly because does not appear capable of reversing that trend to zero-point growth levelswhich, with the exception of the post-pandemic phase, has characterised our economy over the last 25 years.

We appreciate, and consider it a value to be preserved, the focus on public accountsThis is consistent with a fiscal policy framework aimed at meeting the targets set in the recent Structural Budget Plan (PSB).

The point is, however, that support for investments and the companies that carry them out are largely absent from the Manoeuvre. This also took into account two factors: the repeal of the ACE last yeari.e. the main instrument for supporting the capitalisation of companies; the slow start of Plan 5.0also due to stringent European regulations, although intended for specific forms of investment.

With this in mind, the only noteworthy interventions are the extension and refinancing of the tax credit for investments in the Single SEZflanked by the renewal of the tax credit for SME listing and the refinancing of the 'New Sabatini'.

This short list should be supplemented, starting with some priorities: resources for development contracts - strategic facilitation measure to support productive investments - and those for industrial research, with particular reference to innovation agreementsi.e. the main selection tool for supporting companies' applied research projects; new appropriations are also needed for the participation of Italian companies in the IPCEIs (major projects of European interest), the only useful instrument for financing frontier research and initial industrialisation.

And speaking of research, we want, on the one hand, reiterate the strategic nature of an instrument such as the R&D tax credit and, on the other hand, emphasise that recognise a modest - and still undefined - capital contribution to those who have joined the spontaneous repayment procedure does not solve the real problem, i.e. the continuing absence of a certain framework for identifying eligible activitiesOn the other hand, the deadlines for repayment - although extended several times - were not adequate to provide companies with a certification of activities, adhering to a procedure that only became operational last July. In short, the new measure appears to be mainly oriented towards inducing companies to join in order to recover resources, rather than resolving the critical situation, especially of certain sectors such as fashion, which is also linked to ministerial guidelines that have changed over time.

Also with reference to the Mezzogiorno, which has been a vital factor for our economy in recent years, The disappearance - as of 2025 - of decontribution in the South is indeed accompanied by the creation of a five-year fund, which confirms its objectives, namely to reduce the development and employment gaps in the South. However, the new measureto be agreed with Europe, has uncertain connotations and should be well coordinated with those of the tax credit for investments in the Single SEZ.

Similarly, the manoeuvre needs to be strengthened in terms of access to credit. This is an area - related to investment and - the performance of which has suffered in recent years due to high interest rates.

There is a need to continue on the current path to bring the state guarantees back to a physiological level - after the expansion needed to cope with the pandemic crisis, the priority is to make the reform of the SME Guarantee Fund, due to expire at the end of the year, structural. One must, accordingly, provide for its refinancing, estimated at around EUR 200 millionnot an exorbitant amount, to maintain the current operation of the Fund in 2025. Remember that the Fund is a vital measure for companies and without which the very extension of the 'New Sabatini' risks proving to be of little use. Looking ahead, a strengthening of the Fund's role in supporting economic growth should also be considered.

The considerations just made, and the proposals for action formulated, are then corroborated by a further fact. To achieve the PSB's programmatic public finance targets, and those of spending review of the NRP, the Manoeuvre imposes some cuts in the ministries' expenditure. The one pertaining to MIMIT amounts to approximately EUR 1.3 billion over the next three yearsfor the most part, these are resources set aside to cover measures for the competitiveness of enterprises, which are in danger of disappearing.

Added to these cuts is the so-called automotive fund for the years 2025/2030. This fund, with a budget of around EUR 5.8 billion over the five-year period, is intended to support industrial development programmes, finance research projects and stimulate demand for low-emission vehicles. The DDL provides for a reduction of approximately 4.6 billion, without any prior discussion with the industry.

The car supply chainwhich sees in components an excellence of our manufacturing, experienced a slump in recent months, with production levels returning to those of early 2013, and a -26% in July 2024 compared to the same month last year (that of motor vehicles fell by 34%). We believe, therefore, that at least part of those resources should be recovered, to support supply in the delicate challenge of transition and not, instead, to boost demandline that has proven in the recent past not to be effective.

And on the subject of transitions, energy continues to be a competitive disadvantage for Italian companies, due to the higher prices paid for gas and electricity compared to France and Germany, as well as non-European countries. The Manoeuvre does not record any significant interventionswhereas it would be appropriate provide funding for research into new nuclear launchers. This, moreover, is in line with what is stated in the PSB, i.e. the government's intention to promote the development of new-generation nuclear power, i.e. a high-technology supply chain, enhancing its potential for the competitiveness of our industrial system.

Regarding, however, the intonation of the Manoeuvrewe cannot fail to note how it, in some passages, appears too intrusive in the dynamics of the company.

We refer especially to the provisions introducing for companies, entities, bodies and foundations that receive contributions from the State the obligation to integrate the composition of the board of auditors or statutory auditors with a representative of the MEF. Upon first application, the threshold of significance of 'contributions' is set at EUR 100,000 per year. A similar provision, albeit with an even more dubious scope of application, imposes a ceiling on directors' remuneration equal to 501T5T of that payable to the first president of the Court of Cassation.

The purpose of these interventions would be to ensure more efficiency in public spending, favouring its allocative effectiveness. Howeverthe imposition of a ministerial-appointed auditor or auditor within companies presents at least two sets of problems: is a measure that is completely disproportionate and denotes an excessive mistrust of companies; it does not consider that the main incentive rules are already subject to forms of monitoringwhich often entail very significant burdens on the companies themselves.

We therefore emphasise the need to eliminate this measure.

On the other hand, it is worth remembering that already at the time of the drafting of the Civil Code of 1942, the legislator abandoned the option of imposing a publicly appointed member within corporate control bodies: to do so today would be to contravene any modern logic of governance capitalist, market-oriented principles.

Turning to the more properly fiscal component of the DDL Budget, we first note how income support measures absorb a large share of the resources, i.e. EUR 17.7 billion out of a total of EUR 30 billion.

In this area, the most significant intervention, which although with some caveat Confindustria appreciates the structural tax reduction for employee incomes up to EUR 40,000, worth almost EUR 13 billion. It replaces and improves the temporary contribution wedge cut measure experienced in recent years.

The contribution to domestic demand that this intervention could generateall the more relevant in the light of the evidence referred to in the introduction, However, it risks being nullified by the parallel reorganisation of deductible expenses, which is planned for taxpayers with a total income above 75,000 euro.

These are a kind of linear cut, which would apply to every tax deduction in the system (net of healthcare costs), also affecting measures that constitute indirect support for certain economic sectors. Moreover, by reducing the spending capacity of those most able to contribute, it risks produce negative effects on demand. We emphasise, moreover, how it is not possible - from reading the technical report - to verify how much this cut in deductions weighs on public finance balances and, therefore, not even to quantify the increase in the tax wedge on labour for taxpayers above 75,000 euro of annual income.

Speaking of taxes, the removal of any turnover limit for the application of the one on digital services ends up affecting not only the so-called web giants, but also small and medium-sized Italian operators, generating a competitive disadvantage for the country system, to the detriment of the digital transition.

Competitive disadvantage is the outcome we also see if we look at the manoeuvre from the point of view of the life sciences, driving force for our economy and for foreign investment in Italy.

Indeed, in the context of an increase in the budget of the National Health Fund, which is a welcome choice, but one that is only certain for 2025, the DDL Budget transfers from pharmaceutical companies to wholesalers a percentage of the retail price of medicineswith the effect of a net cut in revenues, which is equivalent to an increase in the tax burden on these companies of 6%. For this, We call for the elimination of the measurewhich, moreover, does not even benefit the public budget.

In addition, the manoeuvre does not address the issue of payback, also very negative for investment growth in the country. For pharmaceuticals, for example, it will continue to grow, reaching 2.3 billion in 2025. It is a harmful measure for both sectors it affects, pharmaceuticals and medical devices, and one on which we have long been calling for a solution.

Moving on to another side, that of the work and of welfare, the measures do not present elements of particular novelty or significant structural impactboth on the welfareand the industrial transition processes underway. For the most part, these interventions are in continuity with those of the previous budget laws and continue to be temporary and mainly functional to cope with contingent situations.

In this context, The confirmation of the halving - from 10% to 5% - of the substitute tax rate on sums paid to employees in the form of performance bonuses or profit-sharing is positive. Particularly appreciable is the three-year validity of the intervention, which can provide companies with a stable horizon for remuneration policies.

To strengthen it, we believe that the limit of the incremental requirement to be reached each year to qualify for the facility is exceededrecognising it even in cases where the company confirms the same productivity targets as in the previous two-year period. The benefit, in terms of flexibility of application, would in any case benefit workers who have already contributed to the achievement of company objectives in previous years, and, on a more general level, the welfare corporate.

In addition, We particularly welcome the fact that, taking up a proposal by Confindustria, the DDL introduces a tax-free allowance on sums paid or reimbursed by employers - up to a limit of EUR 5,000 per year - to employees for the payment of rent. The measure concerns those whose income does not exceed EUR 35,000 per year and who have transferred their residence beyond a radius of 100 kilometres.

It is the the first step in that Plan for sustainable living in which Confindustria has sought to play an active and proactive role, and which concretises a commitment by companies to tackle a problem that is strongly felt in various areas of the countryA problem which, on the one hand, contributes to the difficulties in recruiting labour and, on the other hand, represents a real factor of social hardship for large sections of the population.

In this sense, it is Equally positive is the fact that the DDL contains a programmatic provision under which a national plan for public and social housing, called 'Piano casa Italia', will be approved by a subsequent Prime Ministerial Decree. This Plan will be dedicated to relaunching housing policies to support individuals and families and will aim, among other things, to identify innovative models of governance and financing of projects, rationalising the available housing supply. This is a measure that can be the framework for implementing the Plan being studied by ConfindustriaWith this in mind, it would be important to make it explicit that, in order to do so, measures are needed to simplify town planning and construction, financial measures, especially guarantees that also encourage the inflow of private savings, and tax measures.

Before concluding, we would like to return our attention to the point from which we started our reflections, namely the need for a decisive boost to investments and the companies that carry them out.

On the one hand, we return to reiterate the need for the refinancing and the timely corrections proposed above.

On the other hand, we believe that a strong signal should be given to Italian companies, foreign investors and international observers, with the clear aim of making the country more attractive.

We refer to a reward system for those who decide to continue to do business in Italy, investing, and for those who decide to move their capital to Italy to produce. Now is the time to be brave, designing a premium IRES mechanism: a significant cut, in the order of 5 percentage points - to be competitive in Europe - the rate applicable to companies that retain profits, so as to consolidate their assets, and make certain types of investments, which are relevant in terms of strengthening competitiveness, especially with a view to transitions, new hires and welfare corporate.

It is a design already outlined in the tax delegation law - and which we appreciated in its general approach - to which we must now implement.

We are aware of the main obstacle to this proposal, namely the budgetary constraints, which are also a consequence of the PSB. However, we believe that even within the folds of the Manoeuvre there is room for a different, and in our opinion more productive, composition of interventions.

For example, Of the EUR 17.7 billion earmarked for income support measures, as much as EUR 4.8 billion can be attributed to two measuresi.e. the unification from four to three of the income brackets relevant for IRPEF purposes and the cut in deductions for incomes above 75,000 euro per year. Measures that, in the first case, will make an insignificant and, therefore, not very perceptible contribution for those concerned and that, in the second case, risk producing - for the reasons already highlighted - negative macroeconomic effects.

Income support measures replacing the cut in the contribution wedge could also be reshapedin order to allocate resources to other chapters and to further mitigate some of the distorting effects of disincentives to work. According to our simulations, around EUR 1.7 billion could be recovered in this way.

And we must not forget that Every year we allocate only 50% of the ETS auction proceeds to the intended purpose of European standards, namely energy transition. This is about EUR 1.7 billion taken away from business competitiveness.

Over the years, the country has often been, and continues to be, at a crossroads. The choice is between returning to being a driver of innovation, progress, opportunity for the younger generations to improve themselves and the welfare conditions inherited from those before them.

Or, decline towards immobility, rentability, towards proximity economy models often with low added value if not coupled with the 'engine' of a technologically advanced and globally competitive industry. We warn the need and urgency for clear signals and bold measures.

For the good of Italy, its companies and workers.