MNI: Draghi Resisting Budget Changes -Officials

Caretaker Italian Prime Minister Mario Draghi is resisting attempts by the incoming right-wing coalition to make significant changes to the 2023 budget, but if necessary could ask for an extension of the Oct 15 deadline to submit a draft of the spending plans to the European Commission, finance ministry sources told MNI.

While Draghi is in contact with the likely next prime minister Giorgia Meloni, sharing technical information for a smooth transition of power, he considers it would be mistaken to introduce new policy measures into a budget which is traditionally prepared at this time, and whose broad outlines are already taking shape.

“Lots of calls are happening, information sharing. Not only between the leaders but with their economic people so they can move quickly when they get here,” one finance ministry source said.

While the draft sent to Brussels would normally incorporate some flexibility based on government policy measures, Draghi is concerned that Meloni’s plans, details of which are still being negotiated with her coalition partners, may be too uncertain to cost.

POSSIBLE EXTENSION

If necessary, Italy could ask the European Commission for an extension of the budget deadline, in order to allow the new administration to prepare the document itself, the officials told MNI. But this would depend on a relatively quick conclusion to negotiations within the coalition over the shape of the new government, and even in that case the scope for changing the budget plans would be limited.

Italy’s weekend elections were the first ever to take place in the autumn budget period, and there is no precedent as to how to incorporate an incoming government’s plans into the process.

Macroeconomic projections used as a basis for the budget are set to be presented this week, with finance ministry officials telling MNI that the government is likely to foresee 2023 growth of between 0.5% and 0.8%, and a fiscal deficit of about 5% of gross domestic product.

Brothers of Italy leader Meloni has said in public that her government will stick to Draghi’s deficit outlines for 2023 and that funds for lowering taxes would come from steep cuts to the EUR9 billion annual outlay on a minimum guaranteed income. (See MNI INTERVIEW: Italy Budget To Keep Draghi Outline-Meloni Aide)

But internal coalition discussions on policy will be tough, with calls for more measures to address rising energy prices, and one of the parties, the nationalist League, is arguing for an additional EUR30 billion of borrowing.

While the document sent to the European Commission is meant to provide a guide to Italy’s fiscal outlook, the budget will later have to be approved by parliament, during which process significant changes can be made.