MNI: Italy Faces Tough Deadlines For NextGenEU Cash-Officials

The Italian government anticipates a tough challenge to meet deadlines to qualify for future tranches of its EUR200 billion in NextGenerationEU funding, after gaining only partial concessions from the European Commission in talks on overhauling the National Recovery Plan which sets out spending under the programme, officials told MNI.

While Brussels agreed to increase some NextGenEU funding after months of talks this only partially offset inflation since its inception, and Italy failed to gain permission to extend some projects beyond the programme’s 2026, deadline, two sources from the Italian government told MNI.

Rome had hoped to match Spain in achieving a list of projects that could continue beyond 2026, but the Commission insisted that it should apply on a project-by-project basis under Recovery and Resilience Facility rules, one official said. (See MNI: Spain To Spend EUR5 Bln Or More Beyond NGEU Deadline)

Italy’s European Affairs minister, who is responsible for the National Recovery Plan, has frequently complained that it was designed by the previous government.

But officials fear that now that the months-long negotiation has concluded, Italy will have less room to deviate from targets, though one source stressed that the next Dec 31 deadline would be met. Italy’s last two NextGenEU tranches were only paid after the government answered requests for clarifications regarding its progress on promised reforms.

“We have passed the hardest steps in passing reforms, I would say. We now need to implement and spend all the money. These are the biggest challenges now,” one government source said.

TOUGHER POSITION IN FISCAL TALKS

The outcome of the Recovery Plan negotiation will prompt Rome to push harder for favourable debt treatment of NextGenEU spending, particularly on green and digital projects, in talks on overhauling the European Union’s fiscal rules, the sources said. A crucial meeting of EU finance ministers on Dec 8 could determine whether a fiscal rules deal is made in time to be approved before European parliamentary elections next year.

Rome had until now been satisfied with compromise proposals for fiscal rules made by Spain, holder of the bloc’s rotating presidency, including making it easier for countries exceeding borrowing limits to qualify for adjustment programmes spread over seven rather than four years, the officials noted. (See MNI: Talks Turn Tough Ahead Of Dec 8 EU Fiscal Rules Meeting)

“The seven-years debt reduction horizon was a good step but it does not make sense if it comes with harder debt reduction and we can’t make our necessary investments,” one source from the finance ministry told MNI, noting that failure of the fiscal talks and a return to the bloc’s old rules would be a significant failure, also harming countries which have called for a tougher line, such as Germany, where government spending looks set to be slashed following a court ruling.