Italian Economy Minister Giancarlo Giorgetti gestures during a vote of confidence on the 2023 budget in the lower house of parliament on December 23, 2022 in Rome, Italy. REUTERS/Remo Casilli/File Photo Get license rights
ROME, Sept 19 (Reuters) – European Union countries will reach an agreement on new budget rules by the end of the year, Italy’s Economy Minister Giancarlo Giorgetti said on Tuesday.
„I think we will reach an agreement by Christmas, if not in October,” Giorgetti said at an event in Rome.
The EU’s fiscal rules underpin the value of the euro, which the 20 countries use. Under the rules, each member state is asked to reduce its budget deficit to 3% of gross domestic product (GDP) and its public debt to no more than 60% of GDP.
However, most EU countries have exceeded these limits, as both the Covid-19 pandemic and the energy price crisis have led to massive government spending.
As a result, the Commission and EU governments are discussing changes to the framework that take into account the large differences in debt levels and economic growth among EU countries while guaranteeing equal treatment.
The main conflict is between Germany, which wants the same annual debt-reduction targets for everyone, and France, which believes that individually negotiated debt-reduction paths are the way to go and that uniform policies won’t work. .
„We have taken a step forward, we are adopting a numerical parameter,” Giorgetti said, adding that Berlin is proposing to reduce the debt-to-GDP ratio by 1 percentage point per year.
Italian Prime Minister Giorgia Meloni said earlier this month that Rome would propose extending the current suspension of existing EU budget rules if EU countries fail to reach an agreement on how to reform them by the end of 2023.
Giorgetti on Tuesday renewed calls for new rules that include investments aimed at greening the economy and favorable treatment to allow some spending, such as financial aid to Ukraine.
Italy is preparing a tough 2024 budget as deficit targets for this year and next year remain high as accounting adjustments due to high interest rates and expensive financial incentives for housing development.
„I’m not afraid of the European Commission, I’m afraid of the judgment of the markets that buy our public debt,” Giorgetti said.
He added that the 2024 deficit should be a „reasonable figure that shows the country’s willingness to return to a prudent fiscal policy”.
Italy estimates 14 billion euros ($15 billion) more interest costs next year due to interest rate hikes by the European Central Bank (ECB) aimed at curbing inflation.
($1 = 0.9359 euros)
Written by Giuseppe Fonte and Gianluca Semeraro, Editing by Gavin Jones and Hugh Lawson
Our Standards: Thomson Reuters Trust Principles.