Italy sets aside a further $1.38 billion to help households weather energy costs

By Giuseppe Fonte

ROME (Reuters) - Italy approved on Monday measures worth around 1.3 billion euros ($1.38 billion) to help families cope with energy costs in the final quarter of this year, according to government officials and a draft seen by Reuters.

Among other measures, the government plans to extend a reduced sales tax rate of 5% for gas supplies in the October-December quarter, at a cost of 629 million euros.

An additional 100 million euros will go to help the poor pay for fuel, the draft of the decree approved by the government showed.

Italy's allocation of more spending to help families weather rising costs is at odds with pressure from the European Central Bank on all euro zone countries to speed up the phase-out of expansionary policies adopted since the COVID pandemic in 2020, as the bank fights to bring down inflation.

Energy costs started to rise again in the last few weeks after progressively reversing from peaks, prompting the Italian government to boost and extend for a further three months some of the aid measures that had been financed until September.

European gas prices, as measured by the benchmark European gas contract, have shot up to around 42.80 euros per megawatt hour (MWh) by Monday, up from 30.6 euros on July 25, although they are well below levels of 340 euros/MWh reached in August 2022 after Russian gas supplies dwindled following Moscow's invasion of Ukraine.

The measures approved on Monday also help small shopkeepers who have not correctly issued invoices and receipts to regularise their position.

The scheme is consistent with a more lenient approach towards tax compliance adopted by Prime Minister Giorgia Meloni, who since taking office last October has introduced a number of tax amnesties.

The cabinet is expected to meet again on Wednesday to unveil a raft of economic targets in the Treasury's annual Economic and Financial Document.

Meloni is preparing to raise the budget deficit goals for this year and next while also cutting GDP growth forecasts, sources told Reuters last week.

($1 = 0.9447 euros)

(Editing by Alison Williams and Susan Fenton)