Italy May Withdraw from EU SAFE Defence Due to Lack of Energy Budget Flexibility
Italy's Stance on EU SAFE Financing and Budget Flexibility
By Giuseppe Fonte
Background: The SAFE Financing Scheme
ROME, May 18 (Reuters) - Italy could drop plans to tap the European Union's SAFE financing scheme on defence without more lenient budget rules on energy-related spending, Prime Minister Giorgia Meloni said in a letter to EU Commission President Ursula von der Leyen.
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 Request for Budget Leeway
In a diplomatic escalation with the EU, Meloni 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.
Meloni's Letter to the EU Commission
"Italy considers it necessary to temporarily extend the scope of the National Escape Clause (from budget rules), which already applies to defence spending, to include investments and extraordinary measures needed to address the ongoing energy crisis," Meloni wrote in a letter sent late on Sunday and seen by Reuters.
"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."
The National Escape Clause Explained
Under the "escape clause", the European Union allows countries to exceed the bloc's deficit limits either to increase their defence spending, or to tackle exceptionally averse economic circumstances.
Defence Spending Flexibility
In the case of defence spending, the budget flexibility would be available for four years starting from 2025, with an increase in the deficit through 2028 that must not exceed 1.5% of national output per year.
Potential Extension to Energy Spending
Extending the clause to energy-related spending would potentially allow Italy to fund costly aid measures for firms and families worth more than 30 billion euros ($34.90 billion).
Impact on Italy's Budget Deficit
This would entail Rome dropping its current plans to bring its budget deficit below the EU's 3% of GDP ceiling this year.
The EU has so far said the energy crisis does not justify deviation from budget rules.
Italy's Warning and Justification
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.
Meloni's Argument to the EU
"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.
Additional Information
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(Reporting by Giuseppe Fonte, editing by Gavin Jones)
