Italy to request more post-COVID funds from EU despite payment delay

• EU delaying release of post-COVID funds to Italy

• Italy struggling to hit targets needed to access funding

• Delays create a problem for public finances

ROME, July 11 (Reuters) - Italy will request a further 16 billion euros ($17.6 billion) in post-COVID funds despite a delay in getting the previous instalment, European Affairs Minister Raffaele Fitto said on Tuesday.

The hold-up in securing the money is \“clearly a problem,\” Economy Minister Giancarlo Giorgetti said earlier, acknowledging rising challenges for the public finances.

Italy is due to receive 191.5 billion euros in grants and cheap loans through 2026 from the EU Recovery and Resilience Facility (RRF) in what is seen as a once in a generation opportunity to revitalise a sluggish economy.

But the Rome government is falling behind schedule in terms of spending the cash it has already received and in meeting designated \“targets and milestones\” that trigger the release of fresh payments.

The government is managing the situation for the moment, Giorgetti said, confirming plans to keep the budget deficit on a downward trend in the face of a disappointing start to the year.

Fitto said there was no guarantee that the fourth tranche, which Italy would request in the coming days, would be received by the end of the year.

To speed up the approval process, Rome asked the EU to review 10 out of 27 goals that would trigger the release of these funds.

BALLOONING STATE BUDGET DEFICIT

The third instalment Italy is still waiting for is worth 19 billion euros and is related to dozens of goals that were supposed to be reached in the second half of 2022, including the creation of 7,500 sleeping accommodation units for students.

\“I hope that these resources will be disbursed, if EU funds do not come it is clearly a problem,\” Giorgetti said when asked about the impact on state coffers of delays.

The state sector borrowing requirement (SSBR), a narrower aggregate than the public sector deficit, stood at 95 billion euros at the end of June, up more than 50 billion euros on last year.

\“We are monitoring (public finances), we have targets to meet and we will meet them,\” Giorgetti said, reiterating that the Treasury has no plans to change its guidance for the issuance of medium- to long-term sovereign bonds in 2023.

This year, Prime Minister Giorgia Melonis government is targeting a budget deficit of 4.5% of gross domestic product (GDP), almost halving last years 8.0% figure.

After declining to a projected 3.7% of GDP next year, the deficit is seen returning to the European Unions 3% ceiling in 2025.

($1 = 0.9102 euros)