Italy wary of triggering further budget adjustments by Eurostat

ROME (Reuters) – Italy must take care to avoid further fiscal adjustments by European Union statistics agency Eurostat, otherwise the government may be forced to rewrite its 2024 budget in a restrictive way, the economy minister said on Tuesday.

Giancarlo Giorgetti’s remarks highlight fears that a future accounting ruling by Eurostat could push up Italy’s budget deficit in 2024 and following years, making Rome’s financial position even more vulnerable.

The government needs to be careful not to trigger “the VAR room in Brussels”, Giorgetti said, referring to the “video assistant referee” used during soccer matches to ensure compliance with the rules of the game.

Earlier this year, a preliminary ruling by Eurostat over the ways that costly fiscal incentives for home improvements should be classified in state accounts forced Italy to revise higher its deficits for the last three years.

However, Eurostat may still decide that the impact of the tax credits should be shifted to 2024 and beyond, revising lower Italy’s budget deficits of recent years but increasing them from 2024 onward, when tighter EU budget rules are expected to come into force.

In that case, “we would risk having to redraft our 2024 budget in a further prudent and restrictive direction”, Giorgetti said.

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. Italy is proposing ways to make them as lenient as possible.

“Fiscal rules need to be drawn up to make it possible to deal with exceptional events…,” Giorgetti said.

(Reporting by Giuseppe Fonte; Editing by Gareth Jones)