MNI: Spain, Italy Discuss Joint Push For NGEU Extension-Source

Italian Prime Minister Giorgia Meloni and Spain’s Pedro Sanchez discussed whether they should make a joint push to extend the EUR800 billion NextGenerationEU programme beyond 2026 during their meeting in Rome on Wednesday, a source from the Spanish delegation told MNI.

While neither leader wants to make a formal request for an extension of the huge Covid recovery programme in the short term – following clear indications from Brussels that this would cross a red line – they both agree that the current cut-off date for spending the money is too tight.

Both countries, the two largest recipients of NGEU funds, are in talks with the European Commission aimed at finding ways to spend the money effectively and on time. Italy argues that its Recovery Plan detailing investments and setting binding targets in return for disbursements under the programme is out of date given the surge in inflation following Russia’s invasion of Ukraine, and should be redesigned to take account of higher costs, with some funds redirected towards energy projects, an Italian source told MNI. (See MNI: Italy's Delayed NGEU Funds Approved In Weeks-Officials)

While Spain has only recently decided to request loans under the programme, having earlier taken grants, the Spanish are now deploying similar arguments to the Italians as they seek Brussels’ approval for expanding their original NGEU Recovery Plan.

FISCAL RULES

The leaders also discussed the threat to Europe’s competitiveness from subsidies contained in the U.S. Inflation Reduction Act and from higher energy prices, as well as the need to overhaul Europe’s fiscal rules in the second half of the year, when Spain will assume the EU’s rotating presidency.

“If we fail to reform the fiscal rules this year, Europe will lose credibility,” said the Spanish source, stressing that few countries will be able to comply with the old rules in their 2024 budgets.

Spanish officials have previously told MNI they are pessimistic of the chances of reforming the rules contained in Europe’s Stability and Growth Pact during their presidency. Both Madrid and Rome look favourably on European Commission proposals to make the bloc’s rules on public borrowing more flexible, but there is strong opposition to any such move from Germany and so-called “frugal” countries. (See MNI: EU Fiscal Rules Reform Unlikely During Spanish Presidency)

“We hope the SGP will be reformed this year, and that the pact looks more to growth than stability,” said Meloni, stressing that it was key for Italy and Spain to cooperate.

Sanchez said both countries are aligned in reforming economic governance. Overhauling Europe’s electricity market to cut companies’ energy costs will be another top priority for the Spanish presidency, he added.

While the socialist Sanchez and the right-wing Meloni come from opposite ends of the political spectrum, with Spanish officials even scheduling the trip before Easter holidays in a bid to lower its domestic media profile, the two countries are natural allies on many European matters. The Spanish PM even found common ground with Meloni on migration, with both agreeing on the need for the EU to do more to help Mediterranean countries cope with inflows.

“When we work together, good things happen for our countries and we make Europe move forward,” said Sanchez in declarations to reporters after the meeting.