Free Trial
USDCAD TECHS

Key Support Remains Exposed

AUDUSD TECHS

Pullback Extends, But Still Looks Corrective in Nature

US TSYS

FED Remains in Play Post-NFP/ISM Data

Real-time Actionable Insight

Get the latest on Central Bank Policy and FX & FI Markets to help inform both your strategic and tactical decision-making.

Free Access

MNI: Italy's Meloni To Get Warm Welcome In Brussels -Officials

(MNI) ROME

Italian Prime Minister Giorgia Meloni looks set for a warm welcome in Brussels today, where EU officials have been positively surprised by the new government’s willingness to engage on its 2023 budget plans.

Meloni will meet with EU President Charles Michel and Commission President Ursula von der Leyen, and Italian sources told MNI she will reassure Brussels regarding the soundness of her government’s 2023 spending plans, due to be unveiled in Rome on Friday. The budget plan will incorporate recent good news on growth and gas prices to create space for increased spending, and Italian sources said it has been carefully drafted in order to win over EU fiscal watchdogs.

“There is a clear willingness to engage and to play within the rules of the game and that is positive. I am very confident that this engagement with the new government will take place in a good spirit and lead to a good outcome,” an EU official said earlier today.

The PM was approaching the visit in a “positive and constructive attitude,” said an Italian source close to Meloni

“She wanted Brussels to be her first foreign trip in order to stress her readiness to compromise with the EU,” the source said.

FLASHPOINTS

But, despite the cordial relations, there are likely to be flashpoints in the discussions, as the Italian leader seeks more EU funds.

First on Meloni’s shopping list is a top-up on the EUR200 billion Italy is due from NextGenerationEU, to compensate for the impact of inflation on projects planned under the programme. NGEU regulation contains provisions for funds to be adjusted in line with prices, but Italy has been pushing for more.

Even if Meloni fails to obtain something on NGEU today, Italy intends to continue to lobby on the matter, an economic policy source in the country’s government said.

Italy also wants other EU funds to help it tackle the energy crisis. The European Commission is already looking into increasing its REPowerEU programme for long-term investment in energy security and autonomy, and is also said to be considering tapping unused NGEU loans to bolster REPowerEU. But it does not favour the new SURE-style loan programme called for by Italy’s Commissioner Paolo Gentiloni. (See MNI: Stiff Resistance To Italy's Push For EU Funds-Officials)

Italy is likely to receive EUR7 billion from a financial upgrade of REPowerEU, said one Italian source.

FISCAL PLANS ON FRIDAY

Meloni is set to present a macroeconomic plan with new growth and deficit projections on Friday, announcing an increase in 2023’s budget deficit projection, currently 3.4% of GDP.

That could still raise hackles in Brussels, where the Eurogroup and Commission are pushing for fiscal policy to be more supportive of the European Central Bank’s anti-inflation struggle.

A senior EU official said earlier today that fiscal stances should be “well aligned” with monetary policy and that monetary policy not fiscal policy is a more appropriate tool to deploy should the eurozone enter into a recession next year, as seems likely.

Surprisingly strong Q3 growth which a preliminary estimate put at 0.5% will give Italy margin for further spending measures in its 2022 and 2023 budgets, with sources telling MNI that additional leeway could amount to EUR 10 billion in 2023.

Italy’s budget plan could be discussed at Monday’s meeting of eurozone finance ministers, where Finance Minister Giancarlo Giorgetti will make a presentation.

Meloni will also announce new energy measures for December worth between EUR7-10 billion, financed by a boost to tax revenues from higher inflation. The recent fall in energy prices also means government efforts to shield consumers and businesses will be cheaper than in the previous Draghi administration’s fiscal projections.

The source said the government is considering using this extra margin to maintain spending on energy measures through January without impacting the 2023 deficit and so providing resources for other plans, such as lowering taxes and setting up a new pension system.

MNI Rome Bureau | +34-672-478-840 | santi.pinol.ext@marketnews.com
MNI Rome Bureau | +34-672-478-840 | santi.pinol.ext@marketnews.com

To read the full story

Why Subscribe to

MarketNews.com

MNI is the leading provider

of news and intelligence specifically for the Global Foreign Exchange and Fixed Income Markets, providing timely, relevant, and critical insight for market professionals and those who want to make informed investment decisions. We offer not simply news, but news analysis, linking breaking news to the effects on capital markets. Our exclusive information and intelligence moves markets.

Our credibility

for delivering mission-critical information has been built over three decades. The quality and experience of MNI's team of analysts and reporters across America, Asia and Europe truly sets us apart. Our Markets team includes former fixed-income specialists, currency traders, economists and strategists, who are able to combine expertise on macro economics, financial markets, and political risk to give a comprehensive and holistic insight on global markets.