© Reuters. FILE PHOTO: Italian Prime Minister Giorgia Meloni attends political festival Atreju organised by Brothers of Italy (Fratelli d’Italia) right-wing party, in Rome, Italy, December 16, 2023. REUTERS/Guglielmo Mangiapane/File Photo
ROME (Reuters) – Hours after signing up to a European Union deal on more lenient budget rules for the 20-nation eurozone, highly-indebted Italy said the rules were still too tough and it would “continue the battle” to change them.
The deal reached on Wednesday to revamp the bloc’s Stability and Growth Pact allows more time for countries to consolidate their public finances.
It provides some relief for Italy, whose public debt is around 140% of the national output and which has no plans to meaningfully reduce it in the near term.
Prime Minister Giorgia Meloni said the new rules – to be effective from 2025 – were better than the old ones but she was disappointed they had not excluded strategic investments from countries’ deficit and debt calculations.
“This is a battle we will in any case continue in the future,” she said in a statement issued late on Wednesday.
The previous stability pact has been suspended since 2020 because of the COVID-19 pandemic.
Since then, pandemic recovery programmes and an EU drive to embark on spending to keep its climate, industrial policy and security goals on track have inflated national debt levels.
The pact’s benchmark requirements of a budget deficit within 3% of gross domestic product and debt no higher than 60% look almost unattainable for many countries, and especially Italy.
The eurozone’s third largest economy posted a deficit-to-GDP ratio of 8% last year, bloated by costly tax breaks on energy saving home improvements, and a debt of 141.6%.
The deficit is targeted at 5.3% this year and the debt at 140.2%.
Rome’s multi-year economic plan drawn up in September targets reducing the debt-to-GDP ratio by a negligible 0.6 percentage points between 2023-2026, while the new EU rules prescribe a minimum average annual amount of at least 1 percentage point per year.
However, the 1 point reduction does not apply when a country has a deficit above 3% and is under an EU disciplinary procedure to cut it.
