Italy's Struggles with EU Recovery Funds

By Giuseppe Fonte

ROME (Reuters) – Italy's record on spending its significant share of the EU's post-COVID funds is patchy, as the minister responsible faced a European Parliament hearing on his potential new role at the European Commission.

EU Affairs Minister Raffaele Fitto is slated to become the EU Commission's vice-president for Cohesion and Reforms, overseeing EU fund spending by member states, including Italy.

If confirmed, Fitto will leave a challenging task for his yet-unnamed successor in Prime Minister Giorgia Meloni's government.

Italy is set to receive 194.4 billion euros ($206.6 billion) in loans and grants from the Recovery and Resilience Facility (RRF) by 2026, the largest amount among EU states.

Since 2021, successive governments have touted the RRF cash as crucial for unlocking Italy's growth potential and modernizing its sluggish economy.

However, Italy trails in utilizing the 113.5 billion euros already secured and anticipates a lower economic boost than expected.

Data from the anti-corruption agency ANAC revealed that over 60% of tenders from 2023 to 2024 are incomplete.

As of October 2, Italy had spent 53.5 billion euros on making the economy greener, developing ultra-fast broadband, and improving rail infrastructure, representing less than 30% of the funds available and below revised government goals.

In response to delays, Fitto claimed the plan is "progressing positively," asserting that EU fund allocations depend on achieving agreed "targets and milestones" instead of spending goals.

However, these delays have financial implications, with the Treasury forecasting a mere 0.7 percentage point GDP growth boost from recovery funds in 2024, significantly less than the 2.1 points originally anticipated for 2023.

The Italian economy is losing momentum despite these funds, with a deficit-to-GDP ratio projected to fall below 3% of GDP only in 2026.

Analysts predict growth below 1% for this year, consistent with last year's 0.7% and far behind 4.7% reported in 2022.

($1 = 0.9409 euros)