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Sunday, June 23, 2024

Italy can meet new EU fiscal rules without changing budget

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(Bloomberg) – Italy does not need to change its budget plans for next year to meet new rules just agreed between the European Union, according to Italy’s finance minister.

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Finance Minister Giancarlo Giorgetti told lawmakers in Rome on Wednesday: “There is no need for a further budget update, as our projections are in line with Europe’s new fiscal rules.”

Giorgetti added that the agreement reached earlier this month by the 27 member states after months of negotiations was “a compromise”. “We will evaluate new European fiscal rules at the appropriate time.”

Italy plans to bring its budget deficit to GDP below the EU limit of 3% in 2026, but new EU rules will give countries some flexibility and provide a reprieve for debt-stricken Italy. .

Giorgetti’s comments come as Giorgia Meloni’s government faces a political backlash over parliament’s decision last week not to ratify the EU bailout fund.

Italian officials have previously linked ratification of the European Stability Mechanism Fund to successful negotiations on new EU fiscal rules and said the decision to refuse ratification showed Italy’s dissatisfaction with the compromise.

Opposition parties have called for Giorgetti’s resignation, but the finance minister hastily defended the government’s decision.

“I never said and never told EU member states that Italy would ratify this mechanism,” he said.

Mr Giorgetti, an ally of Mr Meloni and Matteo Salvini, has so far seen improvements in his country’s fiscal management, reflected in a gradual decline in the Italian-German bond spread, a widely used measure of market risk. I have been cautious.

Wednesday’s measure was 159 basis points, down from 210 basis points when the government’s budget was first announced earlier this year.

The government’s second budget bill is expected to be approved by the House of Commons by the end of this week, meeting a December 31 deadline to avoid a temporary freeze on public spending.

(Updated with fourth graph regarding Italian budget planning)

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