Italy urges EU to ease deficit rules amid Iran conflict

Italy has said the European Union may need to reconsider its strict budget deficit rules if the ongoing conflict involving Iran and broader Middle East tensions continues, raising the possibility of renewed fiscal flexibility within the bloc.

The comments were made by Italian Economy Minister Giancarlo Giorgetti, who suggested that worsening geopolitical conditions and rising energy costs could force EU-level discussions on temporarily relaxing fiscal constraints, News.Az reports, citing Reuters.

Speaking in Rome, Giorgetti said that discussions at the European level would become “inevitable” if the conflict persists, particularly in relation to rules that limit national budget deficits.

He pointed to earlier EU decisions during the COVID-19 pandemic, when fiscal rules were suspended to allow member states to respond to economic disruption.

The EU’s “general escape clause,” activated between 2020 and 2023, temporarily lifted borrowing limits to support economies during the crisis.

Italy is currently working under EU deficit procedures after exceeding bloc limits in recent years, which restricts its flexibility on public spending and taxation.

Officials now expect slower economic growth, with Italy’s GDP outlook potentially being revised downward due to global uncertainty, higher energy prices, and weaker demand.

Sources indicate that growth forecasts for 2026 may also be lowered as the international outlook deteriorates.

Rome has already taken steps to mitigate rising fuel costs, approving measures worth around €500 million to extend fuel tax relief in an effort to stabilize prices.

The government is also preparing updated economic forecasts, with officials signaling that both growth and deficit targets may need to be adjusted.

European Central Bank officials have warned that rising geopolitical tensions and energy market volatility could increase financial instability risks, particularly for highly indebted countries.

Concerns have also been raised about potential pressure on government bond markets if investor risk sentiment worsens.

 

News.Az 

By Aysel Mammadzada