© Reuters. FILE PHOTO: Minister of Economic Development Giancarlo Giorgetti attends the first voting session at the lower house of parliament to elect the new speaker in Rome, Italy, October 13, 2022. REUTERS/Guglielmo Mangiapane
By Angelo Amante and Giuseppe Fonte
ROME (Reuters) -The prospect of subsequent hikes in interest rates by the European Central Bank is worrying for highly indebted countries like Italy, its economy minister said on Saturday.
“We have benefited as a country for several years of a favourable situation, with interest rates close to or below zero, and this is now changing,” Economy Minister Giancarlo Giorgetti said speaking at an event in Rome.
The ECB on Thursday raised its benchmark interest rate by 50 basis points as widely expected, but dashed hopes that such hikes were coming to an end, warning instead of further increases in the months ahead.
Ministers of the Italian rightist government criticised the European Central Bank, which raised the financial pressure on one of the euro zone’s most indebted countries.
Deputy Prime Minister and League leader Matteo Salvini branded the ECB’s conduct “unbelievable, baffling, worrying”, while Defence Minister Guido Crosetto said the move risked helping Russia to undermine Western solidarity for Ukraine.
Giorgetti, a senior member of the League coalition party, said the rate hikes “should in some way advise us to be even more careful with regard to public finances and assess the consequences for the real economy”.
As sky-high energy prices batter the economy, Italy earmarked around 21 billion euros in its 2023 budget, which is currently making its way through parliament, to help firms and families cope with electricity and gas bills in the first quarter of next year.
Giorgetti warned it was “unrealistic” to expect bills to fall by March and said Rome was considering new relief measures, including a scheme to establish a protected price for energy consumption of up to 70-80% compared to previous years.
He said this mechanism could enter into force next spring with the aim of encouraging energy savings.
Giorgetti also urged the European Union to give a strong and strategic response to the U.S. Inflation Reduction Act (IRA), which he said was posing threats to the national economy.
“Some Italian companies are considering moving production to the U.S. following the IRA scheme, it would be a disaster.”
The EU fears that the $430 billion IRA scheme, with its generous tax breaks for domestic production of energy sector components, may lure away EU businesses and disadvantage European companies, from car manufacturers to makers of green technology.