Italy economy minister sees new EU budget-rules deal by end of 2023

Italy’s Economy Minister Giancarlo Giorgetti said on Tuesday he was confident that European Union countries would reach a deal on new budget rules by the end of the year.

“I think we will reach an agreement, if not in October, by Christmas,” Giorgetti said at an event in Rome.

The EU’s fiscal rules underpin the value of the euro used by 20 countries. Under the rules, each member nation is asked to limit its budget deficits to 3% of gross domestic product (GDP) and its public debt to no more than 60% of GDP.

However, most EU countries have exceeded these limits as two years of the COVID-19 pandemic and the energy price crisis have both led to massive government spending.

As a result, the Commission and EU governments are discussing changes to the framework that would take into account big differences in debt levels and economic growth among EU countries while guaranteeing equal treatment.

The main clash is between Germany, which wants annual debt-reduction benchmarks that are the same for all, and France, which believes individually negotiated debt-reduction paths are the way to go and that one-size-fits-all policies do not work.

“We have taken a step forward, we accept a numerical parameter,” Giorgetti said, adding that Berlin is proposing cutting the debt-to-GDP ratio by around 1 percentage point per year.

Italian Prime Minister Giorgia Meloni earlier this month said Rome would propose extending the current suspension of existing EU budget rules if European Union countries failed to reach an agreement on how to reform them by the end of 2023.

Giorgetti on Tuesday renewed calls for new rules to include favourable treatment to allow for some spending, such as investments aimed at making the economy greener and financial aid to Ukraine.

Italy is preparing a difficult 2024 budget as high interest rates and accounting adjustments due to costly fiscal incentives for home improvements make it increasingly likely that the deficit targets for this year and next will be overshot.

“I’m not scared of the European Commission, I’m scared of the judgment of the markets who buy our public debt,” Giorgetti said.

The 2024 deficit “has to be a reasonable number that shows the country’s willingness to return to a prudent fiscal policy,” he added.

Italy estimates higher interest spending of 14 billion euros ($15 billion) next year due to interest rate hikes by the European Central Bank (ECB) aimed at curbing inflation.
Source: Reuters (Writing by Giuseppe Fonte and Gianluca Semeraro, editing by Gavin Jones and Hugh Lawson)