By Angelo Amante and Giuseppe Fonte
ROME (Reuters) – The prospect of subsequent rate hikes by the European Central Bank is worrying for heavily indebted countries like Italy, its economy minister said on Saturday.
“We have benefited as a country from a favorable situation with interest rates close to or below zero for several years and that is now changing,” Economy Minister Giancarlo Giorgetti said at an event in Rome.
The ECB raised interest rates by 50 basis points on Thursday, as widely expected, but dashed hopes that such hikes were coming to an end and warned of more hikes in the coming months.
Ministers in Italy’s right-wing government have criticized the European Central Bank for increasing financial pressure on one of the eurozone’s most heavily indebted countries.
Deputy Prime Minister and League leader Matteo Salvini branded the ECB’s behavior as “incredible, confusing, worrying,” while Defense Minister Guido Crosetto said the move risked helping Russia undermine Western solidarity with Ukraine.
Giorgetti, a senior member of the Lega coalition party, said the rate hikes “should in some ways advise us to be even more cautious about public finances and to weigh the implications for the real economy.”
With sky-high energy prices hitting the economy, Italy has earmarked around €21 billion in its 2023 budget currently going through parliament to help businesses and families deal with electricity and gas bills in the first quarter of next year support.
Giorgetti warned it was “unrealistic” to expect bills to fall by March and said Rome was considering new relief measures, including a program to introduce a sheltered price for energy consumption of up to 70-80% compared to the Years ago.
He said this mechanism could come into effect next spring to encourage energy savings.
Giorgetti also called on the European Union to provide a strong and strategic response to the US Inflation Reduction Act (IRA), which he says poses a threat to the national economy.
“Some Italian companies are considering moving production to the US under the IRA scheme, that would be a disaster.”
The EU fears that the $430 billion IRA program, with its generous tax breaks for domestic production of energy-sector components, could lure EU companies away and penalize European companies, from automakers to makers of green technologies.
(Reporting by Angelo Amante and Giuseppe Fonte, Editing by Angus MacSwan)