| Italy's populist government is planning next year's budget, and its leaders must tiptoe among the expectations of voters and the demands of Europe's fiscal watchdogs, Rome economic reporter Alessandra Migliaccio explains. Plus: Meet the host serving up hot wings and sharp questions and a former IRS agent who's caught between Nigeria and his employer, Binance. If this email was forwarded to you, click here to sign up. As Italian Prime Minister Giorgia Meloni finishes her second year in office, she's having trouble balancing the country's bloated budget while fulfilling her right-wing party's generous campaign promises. In other words, she's discovering what politicians the world over must eventually come to grips with: Reality bites. Meloni's plight is increasingly similar to that of populists worldwide. Their rhetoric appeals to voters, but once in power they have to figure out how to actually pay for their pledges. That's doubly true in the European Union, where watchdogs in Brussels keep a close eye on spending by the bloc's national governments. Although Italy is already on a special watch for excessive deficits, Meloni and her allies have promised to renew a reduction in taxes on wages worth €10 billion ($11 billion) annually—about 40% of her 2025 budget. Despite warnings from economists to limit that expense, Deputy Premier Matteo Salvini last month told voters in Rimini that the government was committed to the full €10 billion "and more."  Meloni. Photographer: Antonio Masiello/Getty Images For the past two years, Meloni was able to fudge things because the EU suspended its rules after the Covid-19 pandemic. And early in her term, she kept the accounts mostly balanced, but the deficit last year ballooned to 7.2% because of a home-improvement incentive passed by previous governments. So far, markets have given her the benefit of the doubt, with the spread between Italy's 10-year bonds and those issued by Germany—a measure of risk—reaching a two-year low in March. The challenge is that Brussels wants Italy to bring its deficit below 3% quickly, and Finance Minister Giancarlo Giorgetti says he needs at least two years to get there. An accounting revision that will likely boost reported economic output may give the government some breathing room (higher gross domestic product would mean a lower deficit in percentage terms), but that won't do anything to bring down a debt load that's well above 130% of output and seen rising in the next few years. Meloni has asked ministries to slash expenses for 2025 by at least €2 billion overall, but that's less than a fifth of what it will cost to implement her tax cuts, along with various other promises such as aid to families with kids (to shore up a declining birth rate) and tax breaks for companies that hire mothers and various disadvantaged groups. A proposed simplification of the number of tax brackets could further eat into revenue. Meloni's fractious coalition requires balancing the often-conflicting goals of her Brothers of Italy party, Salvini's League and late-premier Silvio Berlusconi's Forza Italia. The League and Forza Italia have been adamant about maintaining the wage-tax cut, but they haven't said how they would pay for it. One idea is cutting pensions, though that's always fraught—not least because older people tend to be reliable voters. Taxing profits banks are enjoying because of the recent high interest rates is another possibility. But an attempt to do that in 2023 spooked markets and was ultimately diluted beyond recognition. Antonio Tajani, Forza Italia's new leader, says he opposes any such measure. For at least a few more weeks, Meloni can indulge her cosplay fantasy of ample revenue, happy voters and satisfied eurocrats. But by mid-October, she has to submit her 2025 budget to Brussels—and Italians will learn how much reality will really bite. | 
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