As the European Central Bank prepares to raise interest rates next week, given the fact that inflation in the Eurozone rose to 3.2% in May—well above the ECB reference level of 2%—the EU Commission has turned down requests to allow budget flexibility in order to reduce gasoline prices.
Italy had asked the EU Commission to suspend budget rules because of the energy emergency. The answer came yesterday: The EU allows Italy budget flexibility but only if it 1. Joins the SAFE program (Rearm Europe) and 2. uses part of the SAFE money for Green investments. No government subsidies or tax cuts to reduce gasoline prices or heating bills are allowed.
“We present this package at a moment of profound geopolitical uncertainty and intensifying global competition,” said Economy Commissioner Valdis Dombrovskis, a Latvian. “Competitiveness and fiscal sustainability go hand in hand. Both are essential to Europe’s long-term prosperity, resilience, and sovereignty.”
