Italy may extend excise duty cut on fuels, seeks more lenient EU budget rules
Italy's Response to Surging Energy Prices and EU Budget Flexibility
By Giuseppe Fonte
Excise Duty Cuts and Support Measures
ROME, April 28 (Reuters) - Italy may extend beyond May 1 a cut in excise duties on fuels as part of efforts to help families and firms cope with surging energy prices, Prime Minister Giorgia Meloni said on Tuesday, while also calling for more lenient EU budget rules.
Potential Extension of Fuel Tax Cuts
"We are assessing a further extension, which might be shorter than the previous ones," Meloni told reporters at a press conference following a cabinet meeting.
Tax Breaks to Encourage Employment
The prime minister also said her government had set aside almost 1 billion euros ($1.17 billion) to extend and reinforce some tax breaks designed to encourage employers to hire staff.
Financial Impact and Focus on Diesel
Italy has so far spent around 700 million euros to cut excise duties on petrol and diesel for just over 40 days until May 1.
Meloni said the new cut under discussion could have a greater impact on diesel than on petrol.
Italy’s Energy Vulnerability and EU Budget Rules
Dependence on Imported Energy
Highly dependent on imported energy, Italy is particularly vulnerable to the disruptions to supplies caused by the U.S./Israeli conflict with Iran.
Calls for Budget Leeway
Meloni called for the European Commission to allow member states to soften energy costs by using budget leeway which is explicitly envisaged for defence and security spending.
The National Escape Clause (NEC)
Under a so-called 'National escape clause' or NEC, the EU allows countries to exceed the bloc's budget deficit limits in the case of exceptionally averse economic circumstances, or to increase their defence spending.
In the case of defence spending, the budget flexibility is available for four years between 2025 and 2028, with an increase in the deficit that must not exceed 1.5% of national output per year.
Parliamentary Discussions and Defence Spending
Addressing lawmakers on Italy's budget plans on Tuesday, Economy Minister Giancarlo Giorgetti said spending due to the conflict in the Middle East must be treated in the same way as expenses stemming from the conflict in Ukraine.
"I would tend to find it embarrassing to request budget leeway for defence spending rather than for energy costs," Giorgetti said.
Italy last year planned to increase its defence spending by 0.15 percentage points of GDP this year and next, and by 0.2 percentage points in 2028.
Government Priorities
Underscoring that the 0.15% increase would be worth 3.7 billion euros, Meloni said that capping energy prices was a "top priority" for her government.
($1 = 0.8541 euros)
(Reporting by Giuseppe Fonte, editing by Gavin Jones)
