Italy says EU should consider pausing budget rules if Iran war flares up again

ROME – The European Union authorities should consider a temporary suspension of budget deficit rules if the US-Israeli war with Iran flares up again, Italy’s Prime Minister Giorgia Meloni told Parliament on April 9.

Ms Meloni also said her government was ready to take every possible measure to prevent potential speculative behaviour on energy prices, including introducing windfall taxes on energy companies.

“We believe that discussing a possible temporary suspension of the Stability and Growth Pact should not be taboo. Not a waiver for individual member states, but a general measure,” Ms Meloni said.

Her remarks come as Italy’s government is preparing to cut its gross domestic product (GDP) growth estimates for 2026 and following years in April, making it more difficult for Italy to bring its deficit below the EU’s 3 per cent of GDP ceiling in 2026, as planned.

The EU activated between 2020 and 2023 a so-called “general escape clause” to suspend budget rules and allow member states to respond to the Covid-19 pandemic, which had triggered lockdowns and economic downturns in EU countries and the closure of Europe’s borders.

That clause, however, can be tapped in the event of a severe economic downturn in the euro area or the EU as a whole, something which is not currently expected by leading forecasters.

Italy could also activate a national escape clause allowing member states to deviate from budget goals agreed with the EU in response to exceptional circumstances outside their control. The government has so far ruled out doing so as long as Rome is under excessive deficit procedure.

“Italy remains ready to take every possible measure to prevent potential speculative behaviour (on energy prices), including, if necessary, further action regarding the profits of energy companies,” Ms Meloni added.

She and her predecessor Mario Draghi adopted in recent years windfall taxes on the energy sector, triggering legal disputes with affected companies. REUTERS