(Bloomberg) — Italy won’t need to change its budget plans for next year to meet the new European Union rules just agreed by the bloc, according to the country’s finance chief.
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“Our forecasts are coherent with the new European fiscal rules so there’s no need for additional budget updates,” Finance Minister Giancarlo Giorgetti told lawmakers in Rome on Wednesday.
The deal reached earlier this month after months of negotiations among the 27 member states “is a compromise,” Giorgetti added. “We will evaluate the new European fiscal rules in due time.”
While Italy plans to lower its deficit-to-GDP ratio to below the EU’s limit of 3% in 2026, the bloc’s new rules allow countries to have some flexibility, a respite for debt-ridden Italy.
Giorgetti remarks come as Giorgia Meloni’s government faces political backlash over parliament’s decision not to ratify the EU’s bailout fund last week.
Italy’s officials previously linked the ratification of the European Stability Mechanism fund to a successful negotiation on the new EU fiscal rules, and the decision to reject the ratification pointed to the country’s dissatisfaction on the compromised reached.
While opposition parties have called for Giorgetti’s resignation, the finance minister hastily defended his government’s decision.
“I never said and never told EU partners that Italy would have ratified the mechanism,” he said.
Meloni and Giorgetti, a member of Matteo Salvini’s League party, have so far been prudent in managing their country’s finances, reflected by a progressive drop in the Italian-German bond spread, widely used as a gauge of market risk.
The measure was at 159 basis points Wednesday, down from 210 basis points when the government’s budget was first unveiled earlier this year.
The budget law, the government’s second, is expected to win Lower House approval by the end of this week, meeting a Dec. 31 deadline to avoid a temporary freeze on public spending.
(Updates with context on Italy’s budget plans in fourth graph)
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