Italy accuses EU Commission of fueling domestic political row

The Italian government accused the European Commission late Friday of intervening in a domestic political issue that has “no basis in reality,” signaling a major escalation of a row over how Rome is handling EU funding.

The spat centers on Italy’s decision to strip the country’s court of auditors of oversight of its Covid recovery plan, which has been beset by delays, false-starts and disagreements with Brussels. The Commission said earlier in the day that it was monitoring the situation “very carefully.” 

In an eight-point statement, Prime Minister Giorgia Meloni’s office said the Commission was “fueling an exploitative politicized controversy with no basis in reality.”

It comes as a document seen by POLITICO said the soaring cost of raw materials and administrative delays have put Meloni’s government at risk of missing a string of targets needed to get its hands on EU money meant to fire up economies after the Covid pandemic.

The bloc’s €750 billion recovery fund, agreed in 2020 at the height of the pandemic, was seen as a huge step for the EU because it broke its longstanding taboo of national governments pooling debt. Since then, as economies started to get back on their feet, Russia’s war in Ukraine has created new problems, including inflation rates not seen for a generation. It peaked at 10.6 percent in the eurozone in October.  

According to the document drafted in Rome, Italy – which as the biggest recipient of EU recovery fund cash is seen as a yardstick of the landmark plan’s success – will miss a major June deadline, potentially postponing the next release of funding.

In part, the government report blames a “radical” change in global conditions, citing “fiery inflation,” blocked supply chains, and an “exponential” increase in the cost of raw materials that in some cases means previously identified projects “were no longer attractive,” leaving “tenders deserted.”

Cold water

As a large country that saw a dramatic drop in economic output during the pandemic, Italy is in line to get €191.5 billion in grants and loans and must meet 527 targets. But it hasn’t been straightforward. The European Commission poured cold water on the idea it could use the money to develop two sports stadiums.

The country has already fallen behind schedule, with a payment of €‎19 billion that Rome requested late last year still being scrutinized by Brussels, despite Finance Minister Giancarlo Giorgetti saying in late April that it would be released “within hours.”

According to the government draft report, set to be presented to parliament in Rome next week, projects that will be missed include the construction of hydrogen filling stations. Of 40 projects there have been only 35 replies to the tender, the document said.

Another target, the awarding of construction contracts for nursery schools, will be missed because of accumulated delays under the previous government. The current administration has requested more time from the Commission.

A project to renovate and build new film studios and screens at Rome’s Cinecitta has been restricted by archeological remains.

Of its 527 overall goals to be completed by 2026, Italy is having difficulties realizing 120, the draft report said. Of these, a tenth have at least three problems. Forty-six commitments need to be reformulated.

The draft report cited management and administration problems as the main reason for the delays, as well as inflation and the soaring cost of raw materials.

A Commission spokesperson said the Italian recovery and resilience plan was “now entering a crucial phase,” adding that “effective governance and a strong administrative capacity, at all levels, are essential to ensure the swift implementation of the many crucial investments foreseen in the plan.”

Fossil fuels

After taking power in November, Meloni’s government asked for a modification of the plan in the wake of the energy crisis caused by the war in Ukraine. The Commission agreed to allow states to rewrite plans to incorporate Repower EU measures reducing dependence on Russian fossil fuels.

The government pointed the finger at delays accumulated under the previous government, an overly fragmented plan with “a myriad” of 76,000 projects worth less than €70,000, a lack of capacity by local administrations to collect and input data for monitoring, the tight timeline with projects due in 2026, and the labor market.

Italy argues that it deserves margins of flexibility as its plan is much bigger than others with 527 milestones and targets when France and Germany have only 304 between them, it points out, and 20 percent of Italy’s assessments are results-based, more than many other member states.

In a press conference on Wednesday, Europe Minister Rafaelle Fitto defended the government and said it had implemented new governance and simplification procedures. He said he was confident the plan could be modified to meet the overall objectives.

“When we say Italy is late we should compare the complexity of our plan with that of other European countries. “

But in a speech this week, Bank of Italy Governor Ignazio Visco urged the government not to fall behind, saying, “there is no time to lose”.

This article was updated with the response from the Italian government
Paola Tamma contributed to this report