The newly elected government in Rome wants to help its citizens with high heating costs. Prime Minister Meloni received good advice from the German Finance Minister just in time for the first Eurogroup meeting in Brussels. Because Italy is heading for a recession.
In view of the record debts in Italy, Federal Finance Minister Christian Lindner has warned the new government under post-fascist Giorgia Meloni to exercise budgetary discipline. All euro countries must "return to solid state finances," said the FDP politician at the first Eurogroup meeting with the new Italian Economics and Finance Minister Giancarlo Giorgetti in Brussels. "One thing is clear: We are in an inflationary situation, in a common monetary union, and rules are important there," emphasized Lindner.
Italian-born EU Economic Commissioner Paolo Gentiloni warned his country's government to exercise "fiscal caution". Highly indebted countries are also likely to adopt measures to combat the energy crisis, but they must be "targeted," stressed Gentiloni. He expects the budgetary policy proposals from Rome to be examined in December.
Regardless of Italy's record debt, Meloni announced a billion-dollar relief program for private households and companies on Friday. According to them, this should free up "an additional 22 to 23 billion euros" for the fight against rising energy prices. As a result, Italy's new debt will rise to 4.5 percent of gross domestic product (GDP) in the coming year - well above the three percent permitted by the EU. Meloni's predecessor Mario Draghi had targeted a deficit of 3.4 percent for 2023 and wanted to meet the three percent mark again from 2025. Italy's total debt had recently risen to a high of around 150 percent of economic output. The EU provides for a maximum of 60 percent.
Meloni's government, when unveiling its relief plans, also raised the outlook for economic growth this year to 3.7 percent, beating Draghi's forecast of 3.3 percent. "Thanks to a favorable third quarter," the government was able to free up "about 9.5 billion euros," which the government will make available "from next week" for measures to mitigate higher energy costs, Meloni said.
Economy Minister Giancarlo Giorgetti, who was Minister for Economic Development in Draghi's government, stuck to his forecast of 0.6 percent growth in 2023. The government is ready to face the risks of a recession "which could also affect the Italian economy," said Giorgetti. The International Monetary Fund (IMF) believes that Italy will not be able to avoid a recession next year. He warned that GDP will contract by 0.2 percent in 2023.
