Italy’s Meloni Pledges Not to Expand Deficit to Fund Energy Aid

Chiara Albanese and Sonia Sirletti
·3 min read
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(Bloomberg) -- Italy’s likely next prime minister said her right-wing alliance won’t immediately move to expand net borrowing to help fund emergency aid to offset the impact of high energy prices on households and companies.

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The government in Rome would only seek to widen the budget deficit as “a very last resort,” Giorgia Meloni, the leader of the Brothers of Italy party said Monday ahead of the Sept. 25 election.

Speaking during her only public head-to-head debate with Enrico Letta -- who heads the main party in the center-left alliance -- Meloni added that her government could take unilateral action to decouple power costs from gas prices if the European Union doesn’t make quick progress on a joint effort.

The surge in market prices for natural gas has helped push up Europe’s energy costs as the overall price of power is set by the price of the most expensive source.

“Borrowing 30, 40, 50 billion euros ($50.6 billion) without a cap on energy prices and without decoupling the market would be giving money to speculators,” Meloni said, in a debate broadcast on the website of Corriere della Sera newspaper.

Meloni’s right-wing coalition -- which includes her Brothers of Italy, Matteo Salvini’s League and Silvio Berlusconi’s Forza Italia -- has been consistently ahead of Letta’s bloc and could win a healthy majority that would eliminate the need to make concessions when pushing through legislation.

Such an outcome would help smooth the process of tackling a lengthening list of issues including the energy crisis, the inflation shock, and next year’s budget.

Investors are also watching closely for a possible change in Italy’s hitherto enthusiastically pro-European Union stance. That could exacerbate fears about the country’s colossal debt burden if a Meloni-led administration challenged EU rules designed to keep deficits in check.

Meloni, who would become Italy’s first woman prime minister if elected, has actively sought to calm those fears, saying this month that Italy is already “way too indebted.”

What Bloomberg Economics Says...

The Italian economy is in for a bumpy ride in the second half of the year and won’t have Mario Draghi to help navigate the choppy waters. However, a continuation of most of his economic policies should allow Italy to avoid a debt crisis and resume higher rates of economic growth next year.

--David Powell. Read more here.

During Monday’s debate, Meloni said the government could find cash to finance aid to offset high energy prices by cracking down on Italy’s chronic tax evasion -- a recurring promise from political parties during the election campaign.

Another key issue is how a new government will handle spending the country’s share of the EU’s recovery plan, which the European Commission says is the largest stimulus package ever financed in Europe.

Italy is the biggest beneficiary with almost 200 billion euros ($202 billion), and Meloni has signaled she wants to renegotiate some of the terms. On Monday, she said she is seeking more clarity on the borrowing rules for the funds Italy is receiving.

Letta, a former Italian prime minister who heads the Democratic Party, has faced criticism for his handling of the center-left’s foundering campaign. He arrived late to rallies in northern Italy at the weekend after the electric bus he rented to tour the country ran out of battery.

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