The cabinet of Italian Prime Minister Giorgia Meloni approved a fiscal aid package worth about €1.3 billion ($1.4 billion), including help for households coping with soaring energy bills, a government official said.

Meloni’s right-wing government will extend tax breaks and discounts on electricity and gas bills and help low-income families pay for fuel and public transportation, the official said.

The cabinet also approved other aid measures for businesses including allowing them to pay fines for minor fiscal violations rather than risking the loss of their operating licenses.

The new measures come despite a call by European Central Bank President Christine Lagarde for governments to wind down aid measures tied to past spikes in energy costs.

“As the energy crisis fades, governments should continue to roll back the related support measures to avoid driving up medium-term inflationary pressures,” Lagarde told European Parliament lawmakers on Monday.

“At the same time, fiscal policies should be designed to make the euro-area economy more productive and to gradually bring down high public debt,” Lagarde said.

Italy’s new package is relatively limited in scope, as Meloni is looking to reduce fiscal spending on aid after measures ballooned during the pandemic and subsequent energy crisis.

Shoring Up Support

But the premier is also eager to be seen as taking action to protect families, both to shore up support with voters and to forestall attacks from within her coalition and from opposition leaders, who charge that she’s failed to keep campaign promises.

Her government also has limited room for maneuver given Italy’s mammoth debt load. The country’s deficit is seen increasing to over 5% this year and to almost 4% next year largely due to the effects of a one-time home renovation tax break, which has wreaked havoc on public accounts despite having been phased out by her government.

The administration is scheduled to present its updated budget plan and economic forecasts later this week.

European countries have allocated and earmarked around €758 billion to shield consumers from rising costs since the start of the energy crisis, according to the Bruegel think tank.

Those measures have ranged from price caps for heating and power, to direct income support for some citizens.

Italy’s consumption of gasoline and transport diesel both exceeded their pre-pandemic level in August, according to Energy Ministry data.

--With assistance from John Ainger and Zoe Schneeweiss.