MNI: Italy Expects EC Pushback On Recovery Plan

The Italian government is braced for the European Commission to request alterations to the EUR222 billion National Recovery Plan drawn up as a condition for accessing Covid aid money but remains confident it can respond quickly enough for the first payments to be made by July, Finance Ministry sources close to the process told MNI, though officials in Brussels cautioned that this timetable may prove tight.

The Commission could ask for changes to legislative reforms aimed at boosting the economy and to both Italy's choice of investment projects and to its structures for monitoring how they are carried out, one Italian ministry source said. Italian officials are already in permanent contact with Brussels in a bid to clear up any queries before the Commission readies its "observations and requests" expected to be sent from the second half of June, the official said.

The most challenging requests are likely to deal with the methodology for calculating the amounts to be spent on innovation, infrastructure and direct aid to companies, the official said, noting that while Brussels is still likely to deliver aid money on time it is eager to demonstrate that it will keep close tabs on how each euro is spent.

The EU, too, will be keen to sort out any issues with the plan during the two-month vetting period which has already started, officials told MNI in Brussels, with one stressing that it will take a similar approach to other member states.

"I doubt the Commission will want to officially point the finger at Italy," the official said.

TIGHT TIMETABLE

Any delay to the approval of Italy's plan would push back the date at which the country could start receiving front-loaded funds from the EU Next Generation aid package. The hope is for this to start shortly after the EU starts borrowing under the programme in early July, but with the Commission taking two months to vet the plans and the Council another month after that, officials admit the timetable is already under pressure.

Italian Prime Minister Mario Draghi has reworked the Recovery Plan started by his predecessor Giuseppe Conte, supplying more detail about proposed projects and policy measures. While Brussels has appreciated the changes, it remains concerned about the government's capacity to keep close control of the spending, and worries that some of the projects might overlap, and should be better coordinated within a coherent vision for the future of the Italian economy, sources in Rome said.

Meanwhile, the government is keen to inject new urgency into the legislative reforms which will be key to the plan, particularly an overhaul of Italy's taxation system which was already moving through parliament before Draghi took office. In a bid to get it approved this year, the prime minister has brought in two of his own advisors, Serena Sileoni and Francesco Giavazzi, to help broker the agreement between the different parties of Draghi's coalition necessary to get it passed.

Other legislative reforms are also a priority for Draghi, who wants to push through as many of them as possible before the March 2023 deadline stipulated in the National Recovery Plan, by which time Italy will face general elections.

(Additional reporting by David Thomas in Brussels)