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EXPLAINED: What is Italy doing to cut the rising cost of living?

Amid soaring inflation and price rises, the Italian government has announced new measures to help families and businesses keep costs down. Here's what you need to know.

EXPLAINED: What is Italy doing to cut the rising cost of living?
An extended discount on petrol and diesel at the pump is among measures promised by parties expected to form Italy's new government. Photo by MIGUEL MEDINA / AFP

Italy approved a much-anticipated aid decree on Thursday, August 4th, bringing a new round of state funding intended to tackle the country’s most critical issues: from the rising cost of living and sky-high inflation to the energy and supply crisis. 

READ ALSO: Fuel tax cut and help with energy bills: Italy approves inflation aid package

The ‘aiuti bis’ aid package, worth around 17 billion euros ($17.4 billion), likely marks the last major act by outgoing prime minister Mario Draghi before an early general election next month.

The funding is seen as badly needed after inflation hit 8 percent in Italy in June – the most severe spike the country has experienced since 1986.

After weeks of speculation about exactly which measures may or may not be included in the decree, we now know it contains everything from an extension to the fuel duty cut to more help with energy bills for those on lower incomes.

Here’s what you need to know about the latest measures intended to keep the cost of living under control.

Extension to fuel duty cut 

The current discount on fuel duties is to be extended again to September 20th, though the value of the discount will drop from 30 to 25 cents. 

The discount was recently extended to August 21st but the government decided to further prolong the incentive in a bid to ease the blow that record fuel prices have dealt to consumers and businesses.

The cut was initially introduced as far back as March when the average prices at the pump for petrol and diesel both exceeded the two-euro mark.

Help with energy bills

Measures introduced in the first half of the year to help lower-income households and vulnerable people pay rising energy bills will be extended under the new decree.

It extends an existing government discount on gas and electricity bills for a further three months, until the end of 2022, as well as reducing system charges.

READ ALSO:

Italy’s tax on the ‘excess profits’ of energy companies has meanwhile been extended to June 2023 after the government reportedly received fewer payments than expected.

Tax cut for employees

Workers earning a gross income of under €35,000 are eligible for a two percent tax saving, amounting to a small monthly ‘pay rise’ until the end of this year.

“Already in the budget law we reduced social contributions by 0.8 percent; for the second half of the year this reduction goes up to 2 percent, as we’re now adding 1.2 percent”, said Economy Minister Daniele Franco at a press conference on Thursday.

As the tax relief lasts until the end of the calendar year for a six-month period, the July deduction will be retroactive.

New aid measures announced on Thursday are hoped to boost Italy’s consumer spending power as the cost of everyday goods rises. Photo by ANDREAS SOLARO / AFP

Those earning €35,000 can expect to save around a further €30 per month (1.2 percent of a monthly salary of €2,692 – most Italian salaries are paid out over 13 rather than 12 months to give employees a tredicesima Christmas bonus).

To find out how this may apply to you, it’s advisable to speak to an accountant or your local Italian tax agency (Agenzie delle entrate) office.

More funding for mental health treatment

The new decree will also enhance the existing ‘psychologist bonus’ (bonus psicologo) by allocating an additional 15 million euros to the measure. This will bring the total amount of funds available for the bonus to 25 million euros. 

The bonus was officially introduced at the end of July to help make mental health services more affordable, amid a pandemic-induced crisis in Italy.

All individuals with an Isee (a calculation of relative household income and wealth) lower than 50,000 euros will be eligible to receive a 600-euro voucher, which they’ll be able to use when seeing professionals listed on Italy’s official register of psychologists.

See more information about claiming the bonus in a separate article here.

Discount on public transport tickets

The government will allocate a total of 101 million euros to funding its ‘transport bonus’ (bonus trasporti); 22 million more than the original amount.

The bonus takes the form of a one-time 60-euro discount to be used on the purchase of monthly or yearly tickets for local transport services.

It will be available from September 2022 to all pensioners, students, and employees with an Isee of up to 35,000 euros.

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For members

BRITS IN ITALY

‘It’s a disaster’: How Brits in Italy are being hit by drop in value of pound

We asked our British readers to explain how the recent drop in the value of the pound will affect their lives in Italy. Here’s what they had to say.

‘It's a disaster’: How Brits in Italy are being hit by drop in value of pound

The British pound experienced a record 37-year low against the dollar on September 24th, following on from a months-long fall in its value.

Though the Bank of England has managed to prevent a “material risk” to the country’s stability by buying government bonds, UK markets remain highly volatile and the slide in the value of the sterling seems to have already caused the price of goods and services in the UK to climb.

That’s in the UK, but how about Britons living in Italy? 

Last week, we asked our readers to tell us how they’ve already been affected and what they expect the ongoing impact of a weak pound will be on their lives unless the currency bounces back.  

READ ALSO: Climate zones: When can you turn your heating on Italy this winter?

We received answers to our survey from all corners of the boot, from Bolzano, Trentino Alto-Adige to Oria, Puglia. 

The overwhelming response was that the pound’s drop in value in Italy will negatively impact the lives of UK nationals in Italy.

Expectedly, most respondents pointed to unfavourable exchange rates as being the most negative consequence of the sterling’s slump, with many expressing concern about having to transfer savings from a UK account to an Italian one. 

“For the moment, it is a disaster; I can’t even think of making a transfer of pounds into euros,” said one reader living in the capital, Rome. 

Another Briton, Carol Lewis, living in Collazzone, Umbria, had similar worries. She said: “All my pensions are paid in sterling. It is making what was already a bit tight financially post-brexit even tighter.”

“Combined with increased costs generally, we are having to cut back a lot on extras and be more careful about how we spend our money.”

Pound coins and banknotes.

Following on from the pound’s drop in value, Britons in Italy are expressing concern over unfavourable exchange rates when transferring money from UK accounts. Photo by Tolga Akmen / AFP

Alison Reith, from San Salvatore Monferrato, Piedmont, also acknowledged that the pound’s weakness was putting Brits at a serious disadvantage when transferring money from overseas. 

However, she also pointed the finger at soaring living costs in Italy, admitting that it’ll be difficult to “pay for petrol, food and heating” this winter and “cuts on all costs” will sadly have to be made.  

READ ALSO: EXPLAINED: How much are energy prices rising in Italy this autumn? 

While sharing that expense cuts were in the cards for the cold season, many readers told us how they were trying to overcome their recent money-transferring adversities.

Julius Vloothuis, 75, living in Naples, described money transfer platform Wise, formerly known as Transferwise, as somewhat of a “saving grace” – the website allows clients to move money practically free of charge and sends out alerts when the market has favourable exchange rates.

On a similar note, Dennis, living in Rome, advised fellow countrymen to “act as an investor” and watch the exchange rates on a regular basis.

While most readers were reasonably concerned about the pound’s downswing, some responded to our survey by saying that the event would have little impact on their lives. 

Leslie Whitehouse, a retired teacher living in Bolzano, said that “unless massive, a fall in the rate of pound sterling against the euro will not affect my life”. 

Similarly, Iain Gosling, 73, told us that, having “bought a block of euros last year via [currency exchange service] TORFX”, rate fluctuations haven’t really affected his family thus far. 

Finally, some The Local Italy readers confided that they were actually quite happy with the pound dropping in value.

George Newman, 32, from Viareggio, Tuscany said: “Great, buying a house in the UK now and earning in euros. Tax cut to stamp duty too!! Winning!”

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