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Italy is confident it will receive funds on time from Europe's EUR750 billion Next Generation EU aid package, though any delays could force additional fiscal measures, Economy Undersecretary Claudio Durigon told MNI.

"We are confident that there won't be delays in the disbursement of the funds," said Durigon, speaking in an interview on the same day as Germany's Constitutional Court removed its block on that country's ratification of a key underpinning of NextGenEU.

While he stressed that the timing of the delivery of the funds would also be crucial to determining the size and the number of any new fiscal packages, he added that Italy's accelerating vaccination programme and the planned end of the latest Covid lockdown would have "a very positive impact on public finances."

Key for the government will be ensuring the country is able to receive foreign visitors during the tourist season, without which Italy's economy and public finances would suffer "serious damage," he said.

Sources told MNI earlier this week that the government hopes the loosening of Covid restrictions will enable Italy's budget deficit to come in significantly below the 11.8% of gross domestic product projected in its most recent official forecast. Durigon declined to comment on that report.

STATE AID RULES

The Italian government is also hopeful that the European Commission will further loosen state aid rules, Durigon said, adding that the country wants to extend a moratorium on repayments by companies of some bank and state-backed loans to 15 years from six.

"I am convinced that a useful compromise will be reached for Italy and other European countries," said Durigon, noting that Italy was in daily talks with the Commission about its Temporary Framework for State Aid.

Another Italian official told MNI the talks on state aid are not taking place at a bilateral level but that the government expects the Commission to grant some of its requests once it has spoken to other member states.

The international prestige of new Prime Minister Mario Draghi is weighing in Italy's favour in the talks with the Commission, Durigon said. Political heavyweights such as Draghi, and not just technical-level officials, should also lead Italy's drive during the EU's upcoming talks on reforming the rules on eurozone borrowing under the Stability and Growth Pact, according to the undersecretary, a member of the right-wing League.

For the moment, reducing public debt is not a priority, though economic reforms included in the National Recovery Plan drawn up in order to qualify for NextGenEu funds should address revenue shortfalls in the longer term, he said.