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NextGenerationEU: European Commission endorses Italy's €191.5 billion recovery and resilience plan

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The European Commission has today (22 June) adopted a positive assessment of Italy's recovery and resilience plan. This is an important step towards the EU to disbursing €68.9 billion in grants and €122.6bn in loans under the Recovery and Resilience Facility (RRF). This financing will support the implementation of the crucial investment and reform measures outlined in Italy's recovery and resilience plan. It will play a key role in enabling Italy to emerge stronger from the COVID-19 pandemic. The RRF – at the heart of NextGenerationEU – will provide up to €672.5bn (in current prices) to support investments and reforms across the EU. The Italian plan forms part of an unprecedented coordinated EU response to the COVID-19 crisis, to address common European challenges by embracing the green and digital transitions, to strengthen economic and social resilience and the cohesion of the Single Market.

The Commission assessed Italy's plan based on the criteria set out in the RRF Regulation. The Commission's analysis considered, in particular, whether the investments and reforms set out in Italy's plan support the green and digital transitions; contribute to effectively addressing challenges identified in the European Semester; and strengthen its growth potential, job creation and economic and social resilience. Securing Italy's green and digital transition The Commission's assessment finds that Italy's plan devotes 37% of total expenditure on measures that support climate objectives. The plan includes investments to finance a large-scale renovation programme to increase the energy efficiency of buildings. It also provides for measures to promote the use of renewable energy sources, including hydrogen. The plan places a special emphasis on reducing greenhouse gas emissions from transport, with investments in sustainable urban mobility and railway infrastructure.

The Commission's assessment finds that Italy's plan devotes 25% of its total allocation to measures that support the digital transition. Measures to support Italy's digital transition include investments to support the digitalization of businesses and the expansion of ultra-fast broadband networks and 5G connectivity. Investments are also targeted towards the digitalisation of the public administration, with measures planned for the general public administration, health, justice, and education sectors. Reinforcing Italy's economic and social resilience The Commission considers that Italy's plan includes an extensive set of mutually reinforcing reforms and investments that contribute to effectively addressing all or a significant subset of the economic and social challenges outlined in the country-specific recommendations addressed to Italy by the Council in the European Semester in 2019 and 2020. The plan includes measures to contribute to the sustainability of public finances, increase the resilience of the healthcare sector, improve the effectiveness of active labour market policies, and improve education outcomes.

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The plan is also expected to boost investment with a view to reduce regional disparities, increase the effectiveness of the public administration and the efficiency of the justice system, improve the business environment and remove barriers to competition. The plan represents a comprehensive and adequately balanced response to Italy's economic and social situation, thereby contributing appropriately to all six pillars referred to in the RRF Regulation. Supporting flagship investment and reform projects The Italian plan proposes projects in six European flagship areas.

Commission President Ursula von der Leyen (pictured) said: “Today, the European Commission has decided to give its green light to Italy's €191.5bn recovery and resilience plan. This unprecedented level of investment, coupled with crucial reforms will help rebuild the Italian economy and prepare it for the future. I am proud that NextGeneration will help the Italian people look to the future with confidence and ambition. Now is the time to deliver. We will stand by you every step of the way to ensure that the plan will be an Italian and European success.”

These are specific investment projects, which address issues that are common to all member states in areas that create jobs and growth and are needed for the twin transition. For instance, Italy has proposed to provide €12.1bn for energy efficiency in residential buildings, €32.1bn for sustainable mobility, and €13.4bn to support the digitalisation of businesses. The assessment also finds that none of the measures included in the plan significantly harm the environment, in line with the requirements laid out in the RRF Regulation. The control systems put in place by Italy are considered adequate to protect the financial interests of the Union. The plan provides sufficient details on how national authorities will prevent, detect and correct instances of conflict of interest, corruption and fraud relating to the use of funds.

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An Economy that Works for People Executive Vice President Valdis Dombrovskis said: “Italy's plan will give a structural boost to its economic growth and help to reduce social and regional differences. Ambitious reforms of the public administration and justice system – including through digitalisation – along with improvements to the business environment will do a great deal to remove barriers that are holding up growth. Efforts to reduce tax evasion and make public spending more efficient will make Italy's economy fairer and more sustainable. We also welcome the plan's social aspects, particularly for providing social housing, the measures to benefit southern regions, and its focus on improving education and job opportunities. It will also help to protect the climate by raising energy efficiency of buildings, boosting sustainable transport and promoting renewable energy. We look forward to the plan bringing about real change on the ground once it is put fully into effect.”

Next steps

The Commission has today adopted a proposal for a decision to provide €68.9bn in grants and €122.6bn in loans to Italy under the RRF. The Council will now have, as a rule, four weeks to adopt the Commission's proposal. The Council's approval of the plan would allow for the disbursement of €24.9bn to Italy in prefinancing. This represents 13% of the total allocated amount for Italy. The Commission will authorize further disbursements based on the satisfactory fulfilment of the milestones and targets outlined in the recovery and resilience plan, reflecting progress on the implementation of the investments and reforms.

Economy Commisioner Paolo Gentiloni said: “After an unprecedented crisis, Italy today has a unique opportunity to build a better future. Italy has presented a plan for reforms and investments that will enable the country to address problems that have held back economic development and social progress for far too long. A more effective public administration, more efficient legal proceedings, increased competition: we are no longer talking about a book of dreams but about key elements in a detailed work programme. At the same time, Italy will carry out crucial investments in sustainable mobility, renewable energy, the digitalisation of businesses and the roll-out of 5G and ultra-broadband, unleashing new opportunities for all parts of the country. If Italy can make a success of NextGenerationEU, it can mark the start of a new chapter of stronger growth and sustainable development. Achieving that success must be the number one priority for the years to come. Europe will be at Italy's side every step of the way.”

European Commission

REACT-EU: € 4.7 billion to support jobs, skills and the poorest people in Italy

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The Commission has granted €4.7 billion to Italy under REACT-EU to encourage the country's response to the coronavirus crisis and contribute to a sustainable socio-economic recovery. The new funding is the result of the modification of two operational programs of the European Social Fund (ESF) and the Fund for European Aid to the Most Deprived (FEAD). The Italian national ESF program ‘Active employment policies' will receive €4.5bn to support employment in the areas most affected by the pandemic.

The additional funds will increase the hiring of young people and women, allow workers to participate in training and support tailor-made services for job seekers. In addition, they will help protect jobs in small businesses in the regions of Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sicily and Sardinia.

Employment and Social Rights Commissioner Nicolas Schmit said: “The European Union continues to help its citizens overcome the COVID-19 crisis. The new funding for Italy will help create jobs, especially for young people and women, in the regions most in need. Investments in skills are another priority and are essential to master the ecological and digital transitions. We are also paying special attention to the most vulnerable people in Italy by strengthening the funding of food aid."

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Cohesion and Reform Commissioner Elisa Ferreira (pictured) said: “Regions are at the heart of Europe's recovery from the pandemic. I am delighted that member states are using the Union's emergency aid to tackle the pandemic and initiate a sustainable and inclusive recovery for the long term. REACT-EU funding will help Italians in the worst-hit regions recover from the crisis and create the foundations for a modern, forward-looking economy. As part of NextGenerationEU, REACT-EU is providing additional funding of €50.6bn (at current prices) to cohesion policy programs during 2021 and 2022 to support labor market resilience, jobs, small and medium-sized businesses and low-income families."

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Hungary

Pope urges Hungary to be more open to needy outsiders

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Pope Francis (pictured) said on Sunday (12 September) that Hungary could preserve its Christian roots while opening up to the needy, an apparent response to nationalist Prime Minister Viktor Orban's stand that Muslim immigration could destroy its heritage, write Philip Pullella and Gergely Szakacs.

Francis was in Hungary for an unusually short stay that underlined differences with the anti-immigrant Orban, his political opposite.

Closing a Church congress with a Mass for tens of thousands of people in central Budapest, Francis used the imagery of a cross to show that something as deeply rooted as religious belief did not exclude a welcoming attitude.

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"The cross, planted in the ground, not only invites us to be well-rooted, it also raises and extends its arms towards everyone," he said in his remarks after the Mass.

"The cross urges us to keep our roots firm, but without defensiveness; to draw from the wellsprings, opening ourselves to the thirst of the men and women of our time," he said at the end of the open-air Mass, which Orban attended with his wife.

"My wish is that you be like that: grounded and open, rooted and considerate," the pope said.

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Francis has often denounced what he sees as a resurgence of nationalist and populist movements, and has called for European unity, and criticised countries that try to solve the migration crisis with unilateral or isolationist actions.

Orban, by contrast, told the Bled Strategic Forum in Slovenia last week the only solution to migration was for the European Union to "give all rights back to the nation state".

Pope Francis arrives to meet with representatives of the Ecumenical Council of Churches in the Museum of Fine Arts in Budapest, Hungary, September 12, 2021. REUTERS/Remo Casilli
Pope Francis greets people as he arrives in Heroes' Square in Budapest, Hungary, September 12, 2021. REUTERS/Remo Casilli
Pope Francis arrives at Budapest International Airport in Budapest, Hungary, September 12, 2021. Vatican Media/­Handout via REUTERS   ATTENTION EDITORS - THIS IMAGE WAS PROVIDED BY A THIRD PARTY.

The pope has called for migrants to be welcomed and integrated to tackle what he has called Europe's "demographic winter". Orban said in Slovenia that today's migrants "are all Muslims" and that only "the traditional Christian family policy can help us out of that demographic crisis."

Francis, 84, who spent only around seven hours in Budapest, met Orban and President Janos Ader at the start of his visit.

The Vatican said the meeting which was also attended by the Vatican's top two diplomats and a Hungarian cardinal, lasted about 40 minutes and was cordial.

"I asked Pope Francis not to let Christian Hungary perish," Orban said on Facebook. Hungarian news agency MTI said Orban gave Francis a facsimile of a letter that 13th century King Bela IV sent to Pope Innocent IV asking for help in fighting the Tartars.

Later on Sunday Francis arrived in Slovakia, where he will stay much longer, visiting four cities before returning to Rome on Wednesday.

The brevity of his Budapest stay has prompted diplomats and Catholic media to suggest the pope is giving priority to Slovakia, in effect snubbing Hungary. Read more.

The Vatican has called the Budapest visit a "spiritual pilgrimage". Orban's office has said comparisons with the Slovakia leg would be "misleading".

The trip is the pope's first since undergoing major surgery in July. Francis told reporters on the plane taking him to Budapest that he was "feeling fine".

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Banca Monte dei Paschi

Banca Monte dei Paschi is a 'huge problem', Italy's League says

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Italy's Banca Monte dei Paschi (BMPS.MI) is a "huge problem", the head of the right-wing League party said on Sunday, voicing concerns over a potential sale of the Tuscan bank to bigger rival UniCredit (CRDI.MI), writes Francesca Landini, Reuters.

Having taken control of Monte dei Paschi (MPS) in 2017 after a €5.4 billion ($6.3bn) bailout, the Italian Treasury has committed to returning the world's oldest bank to private hands by mid-2022, with Rome now trying to broker a merger with UniCredit.

"The solution could be a merger, but not a sell off to UniCredit," the League's Matteo Salvini told reporters on the sidelines of an annual business conference in Cernobbio on Lake Como.

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The Treasury should take time and push for a tie-up with Italian banks that are focused on lending to small and medium-sized enterprises instead of rushing to sell it to UniCredit, Salvini said.

"MPS and other local banks could create a third banking group," Salvini said, hinting at a potential tie-up with Banca Carige (CRGI.MI) and other regional lenders in southern Italy.

The leader of the League party, which is part of the governing coalition, said a tie-up between UniCredit and MPS could trigger 7,000 job cuts and the closure of 300 branches.

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MPS last month posted better than expected second-quarter results but said it still planned to raise 2.5 billion euros in cash next year if it failed to secure a buyer.

Salvini said it would make sense for the Treasury to inject additional funds into MPS if it needed to put the bank back on the market in the medium term.

The bank's home town of Siena, like the rest of the central region of Tuscany, is a traditional bastion of the centre-left PD party, which has often been criticised for contributing to the Tuscan lender's troubles.

Salvini repeated his previous harsh criticism of PD and said the party should take responsibility for the lender's woes.

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