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Italy will speed up drilling for new sources of domestic gas in a bid to lower energy prices for its industries, reversing a decade of restrictions on new exploration.
The plan is part of the new Prime Minister Giorgia Meloni’s first budget law, and the government is pledging €30 billion of additional energy aid. The government estimated about 15 billion cubic metres of gas production from the domestic drilling sites over the next 10 years. Part of the gas will be sold to energy-intensive companies at capped prices.
Meloni’s budget pledges will be partly financed by raising deficit targets for this year and next. The government now projects a 2022 shortfall of 5.6% of gross domestic product from 5.1% previously. Italy plans to progressively cut deficit in coming years from 4.5% in 2023 to 3% in 2025, the target for countries using the euro.
The new deficit forecasts are part of the budget update approved by the right-wing government, and show Meloni’s balancing act to finance key measures to support the economy while sticking to European Union budget rules that require cuts in the country’s debt pile, currently more than 150% of GDP.
“Overall, thanks to better than expected growth, we will be able to budget about €30 billion to energy aid,†Meloni said.
The government will borrow more than €20 billion next year, while higher-than-expected growth in 2022 will help fund a new energy decree worth about €9 billion that will be approved as soon as next week, the premier said at a press conference.
In order to deliver on her promise to reduce the deficit in coming years, Meloni is banking on higher-than-expected growth. Italy’s economy unexpectedly expanded 0.5% in the third quarter. The cabinet raised its growth target for this year to 3.7% from 3.3%, according to a statement.
While Meloni’s first budget outline is set to be well received in Brussels, given the pledge to progressively cut the deficit, Italy may be on course for a spat with foreign allies on migration, after interior minister Matteo Piantedosi confirmed that ships from non-government organisations that aid migrants at sea trying to enter Italy won’t be granted access to ports.
—Bloomberg