Italy gets a new tranche of EU funds as the dust settles on the vote

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ROME (AP) – The European Commission on Tuesday signed the next 21 billion euro ($20.2 billion) tranche of Italy’s pandemic recovery funds, a welcome infusion that comes amid questions over whether Giorgia Meloni and her Eurosceptic party, which won the national electionswill be able to maintain funding.

The outgoing government Prime Minister Mario Draghi, a former European Central Bank chief, secured the funds after meeting 45 milestones required by Brussels to receive the money. These included the enactment of reforms in public administration, education and health, and investments in technology, research, tourism and culture. A first allocation of 21 billion euros, also linked to reforms and investments, was transferred to Italy in April.

Italy received the largest share of the European Union’s recovery fund, around 191.5 billion euros ($185 billion), as it was the European country hardest hit financially by the first wave of the pandemic, when the government failed to meet essential needs Industries closed. Draghi made achieving EU-mandated milestones a hallmark of his 18-month national unity government, which collapsed in July when key allies boycotted a confidence vote.

Melonis Brothers of Italy, which has its roots in a neo-fascist party and struggled with a nationalist program, received 26% of the vote. It is poised to lead a centre-right coalition government alongside the anti-immigrant League, with roots in Italy’s productive north, and ex-Prime Minister Silvio Berlusconi’s Forza Italia party.

Meloni’s victory swept Italy, a founding member of the EU and its third largest economy, sharply to the right and was hailed by other Eurosceptic leaders in France and Spain, who have also made electoral gains in recent months.

Italy has a history of failing to receive all EU funds allocated to it, raising concerns whether Meloni’s inexperience in government would hamper Italy going forward, especially given Draghi’s solid reputation in Brussels has been so crucial to that that the country received so much.

EU funds helped Italy post 6% growth last year, which is slowing to around 3% this year due to inflation and high energy costs.

“Obviously paying off the debt is a priority, but above all the focus now will be on this next-generation EU plan, whether Italy will comply with the plan and all the reforms,” ​​said Pierpaolo Benigno, professor of economics at the University of Bern. “The market will monitor any progress toward that fulfillment.”

Agnese Ortolani, senior analyst at the Economist Intelligence Unit, said she expected a Meloni-led government would do whatever it takes to get the next 19 billion euro ($18.3 billion) tranche.

“Despite some internal disagreements, the right-wing coalition has committed in its election manifesto to sticking with the NRRP, with some revisions to adapt the plan to the new economic context of the energy and livelihood crisis,” she said in a note referring to the National Recovery and Resilience Plan.

Meloni’s political opponents have protested her plans to reallocate some of the EU’s next-generation euro funds, but analysts are less concerned.

“That goes without saying,” said Holger Schmieding, chief economist at Berenberg. “The EU may be open to some changes in how the money is spent, as long as Meloni implements the modest pro-growth reforms that the EU requires as a condition.”

European Commission President Ursula von der Leyen said the newly approved funding was evidence Brussels believed Italy had made good progress on its promised reforms. Von der Leyen, who in recent days issued a veiled warning of a democratic backslide in Italy under far-right leadership, encouraged further work.

“So congratulations Italia and keep up the good work! The commission is with you on your road to recovery,” she said in a statement.

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Colleen Barry reported from Milan.

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