Italy plans to spend additional $14.5 billion to fight inflation
Italy plans to spend an additional 14.3 billion euros ($14.5 billion) to shield firms and families from surging energy costs and consumer prices in what will be one of the last major acts of outgoing Prime Minister Mario Draghi.
The extra funding will come from higherthan-expected tax revenues and will not impact the public deficit target, which Rome in April confirmed at 5.6 per cent of national output this year.
Draghi said on Tuesday that “autumn is expected to be very complex” and that he was ready to discuss ways to cope with the economic downturn with unions and business leaders.
“The government still has much to do,” Mario Draghi, who remains in office in a caretaker capacity, said in a speech on Tuesday.
Mario Draghi, who resigned last week paving the way for a snap national election on Sept. 25, has promised to approve the new aid package by early August.
Rome could repeat a 200 euro bonus paid in July to low and middle-income Italians in August, or make essential consumer staples such as pasta and bread temporarily exempt from VAT sales tax.
Other possible measures include subsidising energy supplies for low-income families and energy-intensive enterprises.
The government said it would seek parliamentary backing to use the budget headroom to fund measures aimed at “countering the effects on households, businesses and public bodies of energy costs and the COVID-19 pandemic.”
Part of the funds will also go to tackle the drought emergency that is affecting parts of the country.
The new package comes on top of some 33 billion euros budgeted since January to soten the impact of sky-high electricity, gas and petrol costs exacerbated by the Ukraine conflict, which are weighing on the growth prospects of the eurozone’s third-largest economy.
Italian Eu-harmonised consumer prices index (HICP) stood at 8.5 per cent in June, up from the 7.3 per cent increase in May.
Core inflation (net of fresh food and energy) was running at +3.8 per cent year-on-year on the HICP index in June, up from 3.2 per cent in the month before.
Meanwhile Italy should not need to cut its gas consumption by 15 per cent in the winter as proposed by the European Commission, the chief executive of gas distributor Italgas said on Monday.
“Thanks to the activity of the government... the upcoming winter should be not so critical for Italy,” Paolo Gallo said, adding that the 15 per cent reduction in gas used in the country should not be required.
Italy has been reducing its reliance on Russian gas since the invasion of Ukraine and is aiming to get its storage facilities filled in time for winter.
Gallo added it would however be up to Italian policymakers to take a final decision on Brussels’ plan.
The European Commission proposed last week that the 27 EU member states each cut their gas use by 15 per cent from August to March.
The target would be voluntary, but the Commission could make it binding in a gas supply emergency.
Brussels has urged countries to curb gas use now to help fill storage ahead of winter, but the EU plan has faced resistance from a number of governments.
The latest proposal, drated by the Czech Republic, offers a range of exemptions to the binding target to use less gas.
The Italgas CEO made his comments during a conference call ater the gas distributor reported a 6.3 per cent rise year on year in firsthalf revenue to 707 million euros ($723 million), driven also by the expansion of the business that helps companies and households to enhance energy efficiency.
Italgas is on track to meet a full-year guidance for its adjusted core profit of between 1 billion and 1.03 billion euros and does not see risks for its business in case of a prolonged halt of gas supplies from abroad.
The group expects to finalise the acquisition of Greece’s DEPA Infrastructure in early September and has already put in place a financing package for the deal, the top executives said.
Meanwhile the Italian fund FSI, the main investors in which include state lender CDP and the sovereign wealth funds of Kuwait and Singapore, has signed a preliminary deal for an investment in payments card and cash machine operator BANCOMAT.
FSI and Bancomat have agreed the terms under which FSI is set to invest in Bancomat “to sustain investments and accelerate its development alongside its banking shareholders”, they said in a joint statement without disclosing financial details.
The payments sector has been swept up in a wave of mergers and acquisitions as it seeks the financial muscle to keep up with technological advances while contending with the threat from new entrants.
Extra funding will come from higher-than-expected tax revenues and will not impact the public deficit target, which Rome in Apr il confir med at 5.6% of nat ional output thisyear