Italy, fearing Eurostat deficit revision, seeks EU flexibility

investing.com:

By Giuseppe Fonte and Gavin Jones

ROME (Reuters) — Italy is lobbying its European Union partners with increasing urgency to approve more flexible budget rules, according to government sources, as bond spreads widen and Rome fears that deviations from its 2024 spending targets will trigger a disciplinary procedure from Brussels.

Giorgia Meloni's government is particularly concerned that a future accounting ruling by the EU's statistics arm Eurostat could push up next year's fiscal deficit, three officials said, making Rome's position even more vulnerable.

The country's central bank later confirmed the risks linked to the upcoming Eurostat decision, to be made by mid-2024.

The EU's fiscal rules, suspended since 2020 due to the COVID-19 pandemic, are due to return next year with amendments now being negotiated by EU governments, and Italy is proposing ways to make it as lenient as possible.

These include favourable treatment of various types of investments as well as higher defence spending and financial and military aid to Ukraine.

Italy's latest proposal, the officials said, would shield it against a review by Eurostat in the coming months of how costly tax credits for green home improvements are accounted for.

Italy has already included them in past budgets, which has inflated its deficits for the last three years.

However Eurostat, using technical accounting criteria, may decide the impact of the tax credits should be shifted to 2024 and beyond, revising down deficits for the years when EU limits were suspended and increasing them when updated fiscal rules return.

The Bank of Italy warned parliament on Monday the Eurostat decision could lead to «a strong reduction in the deficits for 2020-2023 and a considerable