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(Bloomberg) — Prime Minister Giorgia Meloni’s government extended Italy’s fuel tax cut through May 1, committing about €500 million ($577 million) in added funds to blunt the impact of higher energy prices caused by the Iran war.
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Until then, consumers and businesses will continue to see a €0.25 per liter reduction in taxes at the pump, Finance Minister Giancarlo Giorgetti said Friday. The new measures add to a similar-sized package that was set to expire on April 7.
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“We’re talking about an emergency here,” Giorgetti told reporters in Rome. “The overall situation is objectively worrying for the economy,” Giorgetti added, referring to the war in Iran, with effects on monetary and fiscal policy for the countries affected.
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Meloni’s government has limited headroom to intervene, given a mammoth public debt load and European Union fiscal rules. If the Iran war persists it will become “inevitable” that the EU revises the 3% deficit ceiling on member countries, Giorgetti said.
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The lack of flexibility was underscored on Friday, when Italy’s statistics institute said the country had breached the European Union’s deficit ceiling in 2025. The budget shortfall reached 3.1% of domestic product last year, further compressing fiscal headroom for the government as it contends with the energy shock and attempts to respond to a key referendum defeat last month.
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Several European nations, including Spain and France, have also passed energy measures or signaled that they were considering them in response to price shocks caused by the war.
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Italy first provided fuel price relief last month as part of a broader package of measures devised to counter soaring energy prices.
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Meloni has also lowered taxes on liquefied petroleum gas, asked oil companies to limit increases in pump prices, and extended a phase-out of coal to 2038 in response to the war, which began on Feb. 28.
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(Updates with deficit figures, European examples starting from fifth paragraph.)
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