MNI(RPT): Italy Wants Permanent Lending Facility In Debt Talks

(Repeats story first published Nov. 15)

Italy and other southern states are pressing for talks on a new fiscal regime for the European Union to include the creation of a permanent European Union lending facility along the lines of the Recovery and Resilience Facility implemented in the wake of the Covid pandemic, MNI understands.

The talks, expected to last well into next year at least, currently centre on redrawing rules on public borrowing and indebtedness contained in the Stability and Growth Pact. Italy argues that the experience of the RRF, which conditions disbursement of funds on progress in key reforms, shows that access to a new facility could be an effective way of incentivising compliance with a new fiscal regime, one source said.

But not even Italy expects such a facility to be included in the talks for many months, and, like other southern states, is concerned that they should take place quickly and on schedule, officials said, speaking after Eurogroup President Paschal Donohoe met Italian Prime Minister Mario Draghi and Finance Minister Daniele Franco last Thursday in Rome. Above all, the Italians want to avoid any return to the old rules, which include caps on annual borrowing and debt as well as time limits for compensating overshoots, once their pandemic waiver expires at the start of 2023.

"It's an important discussion for them and they want it concluded in a timely manner," one source said.

SQUARING THE CIRCLE

Brussels officials hope member states will agree on aims for new fiscal rules in the first half of 2022, allowing the Commission to come up with a proposal on how to put into effect the agreed objectives. This could be done by modifying the EU's current "two-pack" and "six-pack" fiscal surveillance or by non-legislative means, officials said.

But an official from a hawkish country was sceptical that agreement could be easily reached, as member states attempt to find rules which are at once simple and flexible, promote both growth and green objectives, and are also easy to enforce.

"We are all for squaring the circle. Now we just need to square it," the official said.

Donohoe is also expected to pay a visit to Paris in coming weeks ahead of the launch of France's EU presidency in the first half of next year.