The European Commission rejected requests from Italy and Greece for greater fiscal flexibility, citing the need to uphold the bloc's rules-based framework. The countries sought leeway due to higher inflation and energy costs.
The European Commission's stance signals a commitment to maintaining fiscal discipline within the euro zone, potentially limiting governments' ability to increase spending in response to economic pressures and impacting sovereign debt dynamics.
BRUSSELS, Oct 8 (Reuters) - The European Commission rejected requests from Italy and Greece to grant euro zone governments more fiscal leeway related to higher inflation caused by energy prices and support measures to cushion them, stating that rules could not be changed constantly.
Italian Prime Minister Giorgia Meloni had asked the Commission to factor higher-than-expected inflation into calculations for permitted budget deficits and when evaluating spending deviations. Rome argued that the EU should allow member states to use extra tax revenues generated by inflation to help counter soaring energy costs.
Greek Prime Minister Kyriakos Mitsotakis urged the Commission to exempt temporary national support measures for households and businesses from the EU's maximum net expenditure limit.
"Upward inflation pressures are already considered as part of an overall assessment of relevant factors when assessing Member States' compliance with fiscal rules. We cannot come with new fiscal flexibilities all the time," European Economic Commissioner Valdis Dombrovskis told a news conference. He added, "In fact, this could cast doubt on our collective resolve to uphold the rules-based fiscal framework at a time when the credibility of our commitment to fiscal sustainability is a vital asset."
The Commission has previously granted EU countries leeway in their agreed fiscal consolidation paths to account for higher defense spending and measures to become less reliant on fossil fuels.
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