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By Sara Rossi and Alessia Pe
MILAN, April 3 (Reuters) - Significant delays in Italian
efforts to meet the targets in its pandemic Recovery Plan would
likely lower the country's medium-term growth prospects, with a
negative impact for its credit rating, Scope Ratings said on
Monday.
The European Commission has frozen an overdue
19-billion-euro tranche of post-pandemic funds under its Next
Generation EU (NGEU) programme, and Italy has until the end of
April to persuade Brussels to release the money.
"The timely implementation of NGEU-related reforms and
investments is critical to raise the country's medium-term
growth prospects, and thus ensure the sustainability of its
public finances," Scope Ratings analyst Alvise Lennkh-Yunus said
in comments emailed to Reuters.
"Significant delays in the implementation of reforms or
investment projects would thus likely lower Italy's medium-term
growth prospects, which would be negative for the country's
credit rating."
Italy is due to receive a total of around 200 billion euros
($216.80 billion) of EU Recovery Fund cash in grants and cheap
loans through 2026, making it the single-largest beneficiary in
absolute terms.
However, it is falling behind schedule both in meeting the
"targets and milestones" agreed with Brussels in its reform
plan, and also in spending the money it has already received.
Lennkh-Yunus pointed out that more than half of the NGEU
funds are loans, thus affecting Italy's already sky-high public
debt, so it is vital that the money results in higher growth
over the medium-term to ensure Rome's debt sustainability.
Meeting the goals agreed with Brussels is one of the main
challenges for Prime Minister Giorgia Meloni's rightist
government that took office in October last year.
To gain some flexibility, Italy's EU Affairs Minister
Raffaele Fitto has begun talks with Brussels to replace some
projects from its original recovery plan, which it now realises
it cannot complete by a 2026 deadline.
"The extent to which the Italian government can deploy EU
funds in a timely and growth-enhancing manner will critically
inform our rating outlook," Lennkh-Yunus said.
He added that the rating agency will carefully monitor
whether Brussels continues to disburse the EU funds to Italy
according to plan, and whether any delays are Italy-specific or
also observable across other EU member states.
Scope Ratings is seen as the leading European credit rating
agency, and is in talks with the European Central Bank to become
one of its recognised agencies, joining Standard and Poor's,
Moody's, Fitch and DBRS.
The EU's Economy Commissioner Paolo Gentiloni said on
Saturday he was confident that Rome would get the latest
instalment of the funds.
($1 = 0.9225 euros)
(editing by Gavin Jones)
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