EU rebuffs calls from Italy for more lenient budget rules
EU Commission Rejects Italy's Request for Budget Flexibility
By Giuseppe Fonte and Inti Landauro
ROME/BRUSSELS, May 18 (Reuters) - The European Commission rebuffed on Monday calls from Italy for more lenient budget rules on energy-related spending, saying member states should tackle the negative impact of the turmoil in the Middle East by using existing resources and tools.
Italy's Diplomatic Push for Energy Budget Leeway
In a letter to EU Commission President Ursula von der Leyen, Italian Prime Minister Giorgia Meloni wrote on Sunday that Italy could drop plans to tap the EU's SAFE defence scheme without budget leeway on energy, marking a diplomatic escalation with Brussels.
"The focus at this stage is on making a full use of the significant EU funding already available," a spokesperson for the EU Commission said, when asked about the letter, referring to several EU funds and investment programmes such as The Cohesion Policy, or Next Generation EU.
The SAFE Defence Scheme Explained
The Security Action for Europe (SAFE) instrument is a joint borrowing scheme backed by the EU budget to boost the bloc's defence capabilities and help member states meet more ambitious NATO spending targets.
Italy's Vulnerability and the Escape Clause
Energy Dependence and Economic Risks
Highly dependent on imported energy, Italy is particularly vulnerable to the disruptions caused by the Iran conflict.
Meloni in the letter stepped up her calls for the Commission to grant member states the same budget leeway to ease surging energy costs as is currently allowed for defence spending.
"Without this necessary political consistency, it would be very difficult for the Italian government to explain to the public why it might resort to the SAFE programme," Meloni wrote.
Details of the EU Escape Clause
Under the escape clause designed to boost defence spending, the European Union allows countries to increase their deficits by 1.5% of GDP per year though 2028.
Extending that clause to energy-related spending would potentially allow Italy to fund costly aid measures worth more than 30 billion euros ($34.90 billion).
This would entail Rome dropping its current plans to bring its budget deficit below the EU's 3% of GDP ceiling this year.
Potential Consequences for Italy and the EU
Italy warned last month that it might not be able to honour its commitments to boost defence spending due to the need to counter surging energy prices.
"We cannot justify to our citizens that the EU allows financial flexibility for security and defence in the strictest sense, but not to protect families, workers, and businesses from a new energy crisis that threatens to deal a severe blow to the real economy," Meloni wrote to von der Leyen.
Exchange Rate and Editorial Credits
($1 = 0.8596 euros)
(Editing by Gavin Jones and Sharon Singleton)
