As discussions on overhauling the European Union's Stability and Growth Pact face challenges, Italy's Economy Minister, Giancarlo Giorgetti, asserted that Italy will not accept new EU budget rules that it cannot realistically meet. Giorgetti expressed his stance, stating that it would not be serious to agree to rules that are impossible to maintain.
The EU's fiscal rules, temporarily suspended due to the COVID-19 pandemic since 2020, are set to be reinstated with amendments under negotiation. Italy, with high levels of debt, is advocating for lenient rules. The existing EU rules limit budget deficits to 3% of GDP and debt to 60%, with penalties for non-compliance.
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In September, Italy adjusted next year's deficit goal to 4.3% of GDP, higher than the previous 3.7%, and delayed a return below the EU's 3% ceiling until 2026, without significant debt reduction. The European Commission proposes adjustments focused on cutting net primary expenditure over four to seven years.
Minister Giorgetti highlighted that overly strict adjustment paths could harm growth and worsen debt trends in the medium and long term. He emphasized the need for flexibility, particularly concerning Italy's defense spending increase, which should be considered a "mitigating factor."
Giorgetti outlined Italy's desire for a seven-year period for fiscal adjustment, contingent on implementing its post-COVID recovery plan, without additional conditions. While Germany advocates annual debt reduction, Italy insists it should commence after the effects of fiscal incentives for home improvements are mitigated.
Italy is concerned that a future accounting ruling by Eurostat, the EU's statistics arm, linked to fiscal incentives for home improvements, could raise next year's fiscal deficit. Giorgetti affirmed Italy's willingness to proceed with debt reduction but under favorable conditions.
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