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MNI: Stiff Resistance To Italy's Push For EU Funds-Officials

(MNI) Brussels

A drive by Italy at last week’s eurozone summit for more European funding to help economies cope with the energy price shock has met with strong resistence from the Netherlands and Nordic states, with EU officials telling MNI that finance ministers wary of high inflation and rising bond costs saw no mandate for a new funding tool.

While some supporters of joint EU funding measures took heart from summit conclusions which talked of "common European-level solutions, where appropriate”, sources said it is clear that some states do not see such solutions as appropriate at all. Outgoing Italian Prime Minister Mario Draghi had used a debate on an EU gas price cap last Friday to call for more EU-wide spending.

“That is the reason why you have "where appropriate" in the conclusions, it clearly indicates that some countries don’t see these as appropriate,” one official said.

While Commission President Ursula von der Leyen has recently joined some member states in raising the possibility of more joint funding, officials said there was little political will for such a move and pointed out that Italy’s relations with Brussels are expected to turn rockier with the ascent of new right-wing Prime Minister Giorgia Meloni.

Concrete steps towards any arrangement mirroring the NextGenerationEU funding or SURE programme put in place in response to Covid are unlikely, the official said.

INFLATION, UK, PROMPT CAUTION

“We are nowhere near close to the kind of momentum we had around the time of the pandemic, when member states very quickly agreed that something needed to be done to support those countries that were hit the most and were, at the same time, also the ones that had least fiscal room to respond,” he said.

“Here we are in a situation where we have very high levels of inflation, where we saw what happened in UK and we have a new government in Italy putting everything in question.”

Another source noted that the recent falls in gas prices could also undermine the case for more EU-level funding.

“We are not at any kind of a stage where we are considering a new tool,” the source added.

Mounting pressure for a reallocation of existing but unused NextGenEU funds in favour of central and eastern European countries is also likely to be blocked by the south, which got the bulk of the money available when that programme was agreed in 2020.

“I think that is a reason why southern countries are pushing for a new tool, because they will never give away something that was promised to them,” an official said.

An official with the new Italian government, however, told MNI that the EU would eventually recognise the need for funding, as governments are forced to boost spending in 2023 in response to soaring energy costs as the same time as bond yields rise. (See MNI: Italy's Coalition Eyes Bigger 2023 Deficit Target-Sources)

But, in Brussels, officials insisted that EU finance ministers are likely to concentrate for the time being on the more mundane final line of the summit conclusions, which call for continued “close monitoring of the economic and fiscal situation”, as well as “reinforced coordination.”

MNI Brussels Bureau | david.thomas.ext@marketnews.com
MNI Brussels Bureau | david.thomas.ext@marketnews.com

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