Lagging behind, Italy's plans for EU funds at risk

When Mario Draghi left Italy's government last year, Brussels fretted over the fate of the EU recovery funds he negotiated for his country. Now, fears are rising that billions of euros could be at risk.

"I'm not worried about delays," Prime Minister Giorgia Meloni, who took over in October, insisted on Monday, adding that any issues with the plan "are not the result of choices of this government".

Italy is the main beneficiary of a European Union fund to help the bloc recover from the coronavirus pandemic, with an allocation of 191.5 billion euros ($210 billion) in grants and loans to be paid in instalments until 2026.

In return, Draghi agreed to a timetable of objectives and implementation of sometimes unpopular economic reforms.

But Draghi, a former president of the European Central Bank (ECB), quit last summer after his coalition government fell apart and he was succeeded as premier by Meloni, the untested leader of the far-right Brothers of Italy party.

Read also

Sergio Ermotti: George Clooney of Swiss banking back as UBS boss

At the end of March, the EU froze the third scheduled payment to Italy worth 19 billion euros, pending clarification of some of the 55 objectives due during the second half of 2022. A new deadline has been set for the end of April.

At stake is the credibility of the entire EU scheme, worth 800 billion euros and -- in a first for the bloc -- financed by common debt, despite the qualms of so-called "frugal" northern EU members.

EU Economy Commissioner Paolo Gentiloni, himself a former Italian prime minister, warned in March that "we Italians cannot be responsible for the failure of the first eurobonds at the European level, it would really be a disaster from a European point of view".

Read also

Germany to open its doors as labour shortage bites

If the project fails, debt-laden Italy "would have wasted a unique opportunity" and in the future, "the EU will become more austere" in applying stricter budgetary rules, added another former Italian premier, economist Mario Monti.

Stadiums and beach concessions

Brussels has issues with some of Italy's plans for the money, including the renovation of a football stadium in Florence and the construction of a sports centre in Venice.

The EU funds are supposed to be focused on projects that boost digitalisation, the transition to a more environmentally friendly economy, and infrastructure, notably the rail sector.

Another point of contention is Meloni's decision to delay by at least a year plans to open up to public tender Italy's beach concessions, a decision that drew a rebuke from the government's own independent judicial body.

Spending is also behind schedule, with Italy originally hoping to spend more than 40 billion euros by the end of 2022. But just 12 billion has been committed, six percent of the total EU funds, according to the Court of Auditors.

Read also

Sergio Ermotti back as UBS chief for Credit Suisse takeover

"There are clearly delays as far as spending and construction are concerned, not so much in achieving of objectives," Lorenzo Codogno, a former chief economist at the Italian Treasury, told AFP.

"There is zero chance of getting agreement from Brussels on extending the deadline beyond 2026. Italy has to deliver all milestones and targets by that time," he added.

National credibility

When she took office, Meloni called on Brussels to modify Draghi's plan to allow public tenders for projects to take into account the surge in energy prices fuelled by the war in Ukraine.

But there are other long-running issues that have hampered the efficient spending of EU funds, including a lack of public officials to administer the funds and Italy's legendary bureaucratic red tape.

Tensions have also emerged with Meloni's coalition partners on how to manage the money.

A member of Matteo Salvini's League party proposed renouncing some of the funds rather than taking on more debt for unnecessary projects -- an idea Meloni quickly shot down.

Read also

France braces for new strike turmoil as Macron defiant

The recovery plan has already helped fell one government, after a partner in former premier Giuseppe Conte's coalition withdrew his support in January 2021, criticising the lack of the scope of the programme.

"The credibility of the whole country is at stake," Conte warned last week, adding that failure "is not just Giorgia Meloni's failure but that of all of Italy".

Source: AFP