Italy – The Government approved the much awaited Update to the Economic and Financial Document (NADEF), which on the one hand confirmed the net improvement of the public finance framework (2021 deficit revised to 9.4% from 11.8%, debt now seen to decrease this year to 153.5%), on the other hand it highlights that, also thanks to the fiscal spaces created by the higher than expected growth, the Government intends to implement an expansionary manoeuvre over the three-year period 2022-24 which is worth 1.2% of GDP for next year (about 22 billion). In our opinion, there are further margins for improvement in the public finances this year (we do not exclude that the deficit may also fall below 9%), while Government assumptions regarding GDP growth in 2022-24 seem moderately optimistic.

US – Here we go again, on the verge of crashing against the debt ceiling. If Congress fails to take action by 18 October by raising the debt ceiling or suspending it, the Treasury may no longer be able to honour its financial commitments. The Republicans have set responsibility for a potential default squarely on the shoulders of the Democrats, that have little choice as to how to act. Action is likely to be taken on the debt ceiling in combination with the Build Back Better Act package, to be approved using the reconciliation procedure, and Democrat votes alone. The alternatives would require some cooperation from the Republicans, unlikely as things stand: either a bipartisan Senate vote or the decision to renounce filibustering, both with close to no chance to occur. In the (for now very unlikely) event that the debt ceiling became binding, the economic and financial costs would be massive. 

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