MNI: Inflation Prompts Italy To Mull Project Spending Delays

The Italian government is considering delaying some infrastructure projects under its European-Union-funded EUR220 billion National Recovery Plan, as inflation pushes up material prices and makes companies less willing to bid for contracts, sources familiar with the matter told MNI.

The government of Prime Minister Mario Draghi is preparing a decree for later on Friday to tackle the problem, together with providing assistance to companies and households hit by higher energy costs, the sources said.

The measures, which are still under discussion, could include an increase in public funds available for projects — something being urged by local governments. Draghi has already met local government officials to hear their arguments for more money, sources said.

Another option would be to delay purchases of supplies for the projects while companies are still bidding for tenders, the sources said, pointing to rises in prices of steel and cement which have far outpaced general inflation.

Higher prices could cause delays in the Recovery Plan, particularly in the case of big infrastructure projects, the director of the Observatory on Italian Public Accounts, Carlo Cottarelli, told MNI. This year, the plan calls for contracts to be awarded to carry out 13 big projects, but public financing is not due to be delivered until work on them is scheduled to begin, in 2023 and 2024.

INFLATION ADJUSTMENT

The regulation of the EU’s Recovery and Resilience Facility sets disbursements according to 2018 prices, Cottarelli noted, adding that this should mean that payments should be adjusted according to inflation.

European Commission, sources, though, told MNI that that member states integrated inflation into their costing estimates when they submitted their plans last year. Any requests for more funds would have to be made on a project-by-project basis, they said (MNI: Inflation Prompts Fresh Calls For EU Budget Discipline).

For the moment, the Italian government is not planning to make any such requests, Finance Ministry sources told MNI, though they said that they agreed with Cottarelli that a general revision of disbursements in line with inflation would be a logical response by the EU.