EU set to criticise Italy's fuel-duty cuts as energy prices spike

The European Commission is expected to criticise Italy's emergency fuel-duty cuts and other energy-cost measures as too broad and untargeted, according to a draft document seen in Rome. The issue comes as Italy faces rising energy prices linked in the supplied material to the war in Iran. The Commission is due to publish its country-specific recommendations on Wednesday, a key moment in EU economic coordination.

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The draft says Italy should ensure any measures to soften the impact of higher energy prices are temporary and focused on vulnerable households and energy-intensive firms. It also says support should preserve incentives for energy savings and remain compatible with recommended spending paths. The document does not grant Rome the broader fiscal flexibility it has requested, including an extension of the escape clause recently used for defence spending.

Prime Minister Giorgia Meloni has already written to European Commission President Ursula von der Leyen asking for that flexibility to be widened to cover energy costs. Von der Leyen has not yet replied directly, according to the material supplied. The Commission's position appears to leave room for some targeted support, but not for horizontal subsidies or broad tax relief.

The dispute matters because it sits at the intersection of energy policy, fiscal rules and household pressure in one of the eurozone's largest economies. Italy has introduced emergency measures to cushion the impact of high fuel and power costs on households and firms. The Commission's draft argues that broad measures can be expensive for public finances while doing less to help the people and sectors most exposed.

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The document also refers to the experience of the 2022-2023 energy crisis, when governments across Europe used large-scale support to limit the impact of price shocks. In this case, the Commission says the better approach is temporary, targeted assistance for vulnerable households and energy-intensive firms. It specifically flags Italy's untargeted reduction in excise duties on fuels, which is due to expire on 6 June, as well as a tax credit for road transport, fishing and agricultural enterprises.

The International Monetary Fund has taken a similar line, saying last week that broad measures are not the most effective response. What remains unclear is whether Italy will adjust its policy before the Commission finalises its recommendations, or whether Rome will continue pressing for wider budget leeway. The next point to watch is whether the EU's guidance leads to a narrower support package or a further political dispute over how to respond to energy-price pressure.

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