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EUROPE

Brussels warns Italy to rein in public spending amid pandemic

Most EU member states should continue to invest to support the continent's economic recovery, but heavily-indebted Italy should rein in public spending, the European Commission warned on Wednesday.

Italian Prime Minister Mario Draghi
Italian Prime Minister Mario Draghi expects the country's GDP to recover in the coming year. Photo: Alessandra Tarantino / POOL / AFP

“The economy is bouncing back from the recession, driven by a rebound in demand across Europe,” EU executive vice-president Valdis Dombrovskis said.

“But we are not out of the woods yet. The economic outlook remains riddled with uncertainty,” he said, warning that the coronavirus is still spreading, prices are rising and supply chains face disruption.

Despite these unpredictable threats, European officials predict a strong recovery, and want eurozone governments to maintain their “moderately supportive fiscal stance” to support investment.

EXPLAINED: How Italy’s proposed new budget could affect you

Italy, however, remains a worry. Its public debt passed 155 percent of its GDP last year, and Brussels is worried that it is still budgeting to spend too much next year.

“In order to contribute to the pursuit of a prudent fiscal policy, the Commission invites Italy to take the necessary measures within the national budgetary process to limit the growth of nationally financed current expenditure,” the commission report said.

The commission did not say by how much Italy’s spending plans should be reduced, and its recommendation is not binding on the government.

The European Union suspended its fiscal discipline rules last year, allowing eurozone members to boost their public spending to help their economies survive the Covid-19 pandemic.

But the European commissioner for the economy, former Italian prime minister Paolo Gentiloni, said governments should now “gradually pivot fiscal measures towards investments”.

“Policies should be differentiated across the euro area to take into account the state of the recovery and fiscal sustainability,” he said.

“Reducing debt in a growth-friendly manner is not necessarily an oxymoron.”

Italian Prime Minister Mario Draghi, a former European Central Bank chief, has said Italy’s economy is recovering after the pandemic-induced recession.

Draghi forecast economic growth this year of “probably well over six percent” in a statement on October 28th.

Italy’s GDP rate grew by 2.6% in the third quarter of 2021.

While economists don’t expect Italian GDP to bounce back to pre-pandemic levels until 2022, ratings agency Standard & Poor has revised its outlook for Italian debt from stable to positive.

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MONEY

Italy expands €200 payment scheme and introduces public transport bonus

Italy's government will extend its proposed one-time €200 benefit to more people and introduce a €60 public transport payment, Italian media reported on Thursday.

Italy expands €200 payment scheme and introduces public transport bonus

Seasonal workers, domestic and cleaning staff, the self-employed, the unemployed and those on Italy’s ‘citizens’ income’ will be added to the categories of people in Italy eligible for a one-off €200 payment, ministers reportedly announced on Thursday evening.

The one-time bonus, announced earlier this week as part of a package of financial measures designed to offset the rising cost of living, was initially set to be for pensioners and workers on an income of less than €35,000 only.

However the government has now agreed to extend the payment to the additional groups following pressure from Italy’s labour, families, and regional affairs ministers and representatives of the Five Star Movement, according to news agency Ansa.

Pensioners and employees will reportedly receive the €200 benefit between June and July via a direct payment into their pension slip or pay packet.

For other groups, a special fund will be created at the Labour Ministry and the procedures for claiming and distributing payments detailed in an incoming decree, according to the Corriere della Sera news daily.

One new measure introduced at the cabinet meeting on Thursday is the introduction of a one-time €60 public transport bonus for students and workers earning below €35,000. The bonus is reportedly designed to encourage greater use of public transport and will take the form of an e-voucher that can be used when purchasing a bus, train or metro season pass.

Other provisions reportedly proposed in the energy and investment decree (decreto energia e investimenti), which is still being adjusted and amended, include extending energy bill discounts, cutting petrol excise duty and rolling on the deadline to claim Italy’s popular ‘superbonus 110’.

The €14 billion aid package, intended to lessen the economic impact of the war in Ukraine, will “fight the higher cost of living” and is “a temporary situation”, Prime Minister Mario Draghi has said.

The Local will report further details of the payment scheme once they become available following final approval of the decree.

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