Italy urges EU to give strong response to US IRA

The prospect of subsequent hikes in interest rates by the European Central Bank is worrying for highly indebted countries like Italy, the Italian economy minister said on Saturday.

"We have benefited as a country for several years of a favourable situation, with interest rates close to or below zero, and this is now changing," Giancarlo Giorgetti said speaking at an event in Rome, Reuters reported.

The ECB on Thursday raised its benchmark interest rate by 50 basis points as widely expected, but dashed hopes that such hikes were coming to an end, warning instead of further increases in the months ahead.

Ministers of the Italian rightist government criticized the European Central Bank, which raised the financial pressure on one of the euro zone's most indebted countries.

Giorgetti, a senior member of the League coalition party, said the rate hikes "should in some way advise us to be even more careful with regard to public finances and assess the consequences for the real economy".

As sky-high energy prices batter the economy, Italy earmarked around 21 billion euros in its 2023 budget, which is currently making its way through parliament, to help firms and families cope with electricity and gas bills in the first quarter of next year.

Giorgetti warned it was "unrealistic" to expect bills to fall by March and said Rome was considering new relief measures, including a scheme to establish a protected price for energy consumption of up to 70-80% compared to previous years.

He said this mechanism could enter into force next spring with the aim of encouraging energy savings.

Giorgetti also urged the European Union to give a strong and strategic response to the U.S. Inflation Reduction Act (IRA), which he said was posing threats to the national economy.

"Some Italian companies are considering moving production to the U.S. following the IRA scheme, it would be a disaster."

The EU fears that the $430 billion IRA scheme, with its generous tax breaks for domestic production of energy sector components, may lure away EU businesses and disadvantage European companies, from car manufacturers to makers of green technology.

MNA/PR