EU Rejects Italy, Greece Calls for Fiscal Rule Flexibility

The European Commission has rejected requests from Italy and Greece to ease EU fiscal rules as rising energy prices fuel inflation and increase pressure on government budgets. Brussels warned that repeatedly adjusting fiscal regulations could undermine confidence in the European Union’s commitment to financial stability.

Italian Prime Minister Giorgia Meloni and Greek Prime Minister Kyriakos Mitsotakis urged EU authorities to provide greater budget flexibility, allowing governments to introduce additional measures to protect households and businesses from soaring energy costs.

Meloni called on the European Commission to consider higher-than-expected inflation when calculating permitted budget deficits and assessing deviations from agreed spending limits. Italy argued that governments should be allowed to use additional tax revenues generated by inflation to finance energy relief programs.

Meanwhile, Mitsotakis proposed excluding temporary financial assistance for consumers and businesses from the EU’s maximum net expenditure limits. Greece maintains that such exemptions would help governments respond to rising living costs without violating European fiscal regulations.

However, European Economic Commissioner Valdis Dombrovskis rejected the proposals during a Thursday news conference, emphasizing that existing fiscal assessments already account for inflationary pressures.

"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," Dombrovskis said.

He cautioned that introducing further exceptions could weaken the credibility of the EU’s fiscal framework, particularly when maintaining sustainable public finances remains a priority.

"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," he added.

The European Commission has previously provided member states with additional flexibility in their fiscal consolidation plans to accommodate increased defense spending and investments aimed at reducing dependence on fossil fuels.

However, Brussels appears reluctant to extend similar exemptions to energy-related inflation relief, highlighting the challenge of balancing economic support with fiscal discipline.

The disagreement underscores growing tensions between national governments seeking room for emergency spending and EU policymakers determined to preserve budgetary credibility as elevated energy costs continue to strain European economies.