LONDON — Chancellor Rachel Reeves will make a statement responding to new assessments of the U.K.’s finances on March 3, the U.K. Treasury said on Monday. In a statement, the Treasury said it had asked the U.K.’s independent fiscal watchdog, the Office for Budget Responsibility (OBR), to prepare an economic and fiscal forecast for that date. However, it said the forecast will “not make an assessment of the government’s performance against the fiscal mandate and will instead provide an interim update on the economy and public finances.” “This approach gives families and businesses the stability and certainty they need and supports the government’s growth mission,” it said. The Labour government has previously said it intends to only hold one “major fiscal event” per year. However, a worsening financial outlook forced the chancellor into announcing significant tax and spending changes at last year’s spring statement. At the most recent government-wide budget in November, Reeves increased taxes by a further £22 billion per year. She refused to rule out further tax increases in an interview last week.

The U.K.’s budget watchdog has taken full responsibility for the unprecedented early publication of its budget forecast — but warned that it may happen again if its arrangements don’t change. Last week, the Office for Budget Responsibility’s economic and fiscal outlook — which contained detailed information on what would be in the budget — was accidentally made accessible before Chancellor Rachel Reeves delivered her budget in parliament.  In its investigation into what happened, the OBR said the “pressure on the small team involved” to ensure that the fiscal forecast was published immediately after Reeves finished her speech on Nov. 26 led to the use of a “pre-publication facility” which although is “commonly used” creates a “potential vulnerability if not configured properly.” “The twice-yearly task of publishing a large and sensitive document is out of scale with virtually all of the rest of its publication activities,” said the investigation, which was hastily carried out by peer Sarah Hogg and OBR board member and City bigwig Susan Rice. It called for “completely new arrangements” to be put in place for the publication of market-sensitive documents, and urged the Treasury to pay “greater attention” to the need for adequate support when funding the OBR. The watchdog said that given its small size, it used an outside web developer to upload its contents. It found multiple attempts by outside parties to access the document before it was published, by guessing the URL, and also revealed there was a successful attempt to do so in an earlier major March publication. On Nov. 26, the day of the budget, there were 44 unsuccessful requests to the URL between 5.16 and 11.30 a.m. as the document had not yet been uploaded. Between 11.30 and 11.35 a.m., the web developer began uploading documents to the draft area of the OBR’s website, which the watchdog believed was not publicly accessible. At 11.35 a.m., an IP address which had made 32 previous unsuccessful attempts to gain access to the site accessed it for the first time successfully. Six minutes later, at 11.41 a.m., Reuters sent a news alert reporting the government would raise taxes by £26.1 billion by 2029-2030. The URL was then widely accessed by journalists, markets and other parties between 11.30 a.m. and 12.08 p.m., after which it was removed by the OBR. The report also reveals that one IP address successfully accessed the March version of the fiscal outlook, when Reeves delivered her spring statement. The log shows the document being accessed at 12.38 p.m., five minutes after Reeves started speaking and nearly 30 minutes before publication. “It is not known what, if any, action was taken as a result of this access and there is no evidence at this stage of any nefarious activity arising from it,” the report says. The report doesn’t review how financial markets were influenced by the early publication, but says the OBR will cooperate with the Financial Conduct Authority. The investigation described the mistake as the “worst failure” in the 15-year history of the OBR, but said that it was not a case of intentional leakage, or “pressing the publication key too early.”  OBR chief Richard Hughes is due to appear before MPs Dec. 2 where he will be fighting for his future. Speaking to Sky News on Sunday, the chancellor repeatedly declined to say whether Hughes was safe in his job.  Earlier today, Keir Starmer said that while he was “very supportive” of the OBR, the breach of market-sensitive information was a “massive discourtesy” to parliament. 

The likely collapse of France’s government won’t force it to seek support from the International Monetary Fund, but the country absolutely has to get its public finances under control, European Central Bank President Christine Lagarde warned Monday. “The risks of any euro area government falling is worrying,” Lagarde said in an interview with France’s Radio Classique. “Markets evaluate risks in their totality and we have seen the country risk increase in recent days.” Lagarde said she is very closely monitoring French bond spreads — the premium investors demand for holding French debt rather than German equivalents, which are the benchmark for European bond markets. That spread hit its highest level for the year last week. The French minority government is widely expected be toppled in a confidence vote on Sept. 8, as opposition parties ignore Prime Minister François Bayrou’s appeal to them to support his 2026 budget plans.   Bayrou’s finance minister, Eric Lombard, had warned that a collapse could spark so much turmoil that the IMF would have to intervene, though he quickly backpedalled. Lagarde, who was in charge of the IMF during the bailouts of Greece and other eurozone countries a decade ago, suggested this talk was overdone. She argued that the IMF typically only responds to requests for help from countries that have immediate problems with their balance of payments and which cannot pay their debts. “That isn’t the case with France today,” she said, adding that the IMF “would probably say that the conditions aren’t met” and would instead tell Paris to “get organized … and put your public finances in order.” “It is obviously necessary the direction, as regards terms of debt service and debt volumes, be headed downward and that they come back into the limits of what has been agreed” at a European level, Lagarde stressed. EU rules limit a country’s budget deficit to 3 percent of gross domestic product, but France’s has been well above that level since the pandemic. It is set to stay above 5 percent of GDP this year, while Bayrou is looking for a way to get parliament to approve a budget that would close the gap to 4.6 percent next year. MORE TROUBLES ABROAD Lagarde also expressed concerns over troubles brewing across the Atlantic, where U.S. President Donald Trump has launched an unprecedented attack on the U.S. central bank in an effort to push interest rates down. Trump has attempted to fire Federal Reserve Governor Lisa Cook on the basis of allegations — so far untested in court — that she committed mortgage fraud. Trump has openly boasted that replacing Cook with an appointee of his own would ensure a majority on the Fed’s board willing to do his bidding. Central bankers and independent economists across the world have warned that this could undermine the Fed’s independence from government, which they say has been a cardinal factor in creating prosperity over decades. A lawyer by training, Lagarde said that Trump would find it “very difficult” to take control of the U.S. central bank but warned of dire consequences should he succeed. “If he did manage to do so, I think it would pose a very serious threat to the U.S. economy and the global economy,” she said. “Monetary policy obviously has an impact on the U.S. in terms of maintaining price stability and ensuring optimal employment in the country.” By law, the Fed is required to pursue both low inflation and full employment. Fed Chair Jerome Powell said in a key speech last month that the two goals were currently in tension with each other, but appeared open to cutting rates later this year.

Hungarian Prime Minister Viktor Orbán is reveling in European Commission President Ursula von der Leyen’s political woes ahead of a key confidence vote in the European Parliament. “Time to go,” Orbán wrote Wednesday in a post accompanied by an image of von der Leyen stepping out of a red frame, symbolically indicating her political departure. The post came as the Parliament prepares to vote on Thursday on whether von der Leyen should remain at the helm of the EU executive, reflecting growing tensions around her leadership. The confidence vote stems from frustration at von der Leyen’s undisclosed communications with the CEO of vaccine-maker Pfizer during the pandemic. Speaking in Strasbourg this week, she dismissed the accusations, warning of an “alarming threat from extremist parties trying to polarize societies through disinformation.” In a second post on Wednesday, Orbán framed the vote as a defining moment for Europe. “Tomorrow will be a turbulent day in the European Parliament,” he wrote. “The vote was scheduled due to the corruption scandals piling up around the President, but we all know that corruption is just the tip of the iceberg. This is about competence, results, and the future of Europe,” he added. Orbán’s attack came just a day after the Commission issued country-specific economic recommendations, urging Hungary to adopt “permanent” fiscal measures to address a budget gap. The Hungarian government pushed back, defending its economic strategy. “In contrast to Brussels, for the government the families and pensioners and Hungarian companies come first, not the multinationals,” Hungary’s economy ministry said in a statement Wednesday. Budapest and Brussels have been locked in a broader dispute for years, with the EU freezing billions of euros in funds over rule-of-law concerns. With less than a year until Hungary’s next national election, Orbán has intensified his campaign against the EU — with von der Leyen and the bloc’s support for Ukraine chief among his targets.

BRUSSELS — The European Commission has backed drastic measures announced by the new Romanian government to bring down its borrowing and avoid a blow-up with Brussels. Newly-elected Romanian President Nicușor Dan is pushing a raft of measures including a public-sector pay freeze, an end to energy price caps, and a bumper VAT hike to bring down a deficit that in 2024 hit 9.3 percent of GDP, the widest in the EU. The overspending led the EU executive last year to begin an Excessive Deficit Procedure against Romania, putting it on its list of countries under strict orders to curb their borrowing or else face sanctions. The Council’s approval on Tuesday removes for now the threat of Romania losing financial support from the EU. Following a meeting of EU finance and economy ministers, European Commissioner Valdis Dombrovskis said Bucharest’s measures represented an “important and positive step toward complying with the new excessive deficit recommendation, provided all measures are swiftly legislated and implemented.” The Commission will produce a follow-up assessment by autumn, he added. In a speech given to parliament earlier this week Dan said he wanted to stop Romania’s debt falling to “junk” status, which would make the country essentially uninvestable. The move also marks a shift in the EU’s attitude to Romania after the country came close to electing anti-establishment candidate George Simion in its national election earlier this year. Dan’s proposed package of spending cuts and tax hikes is already proving unpopular, triggering street protests and prompting Simion to call for a no-confidence vote. The last meeting saw European ministers blast the previous Romanian administration for not taking “effective action” to fix the country’s finances. Elsewhere on Tuesday, Romania’s central bank said it expected the package of fiscal measures to push inflation up in the short term but would address some of its underlying causes. In doing so, it said the package would bring down Romania’s financing costs and support the leu’s exchange rate. The Bank had spent an estimated €6 billion in May — nearly 10 percent of its total foreign reserves — in calming what ultimately proved to be a brief crisis of confidence in the local currency.

LONDON — A full-blown trade war mounted by U.S. President Donald Trump would deliver a major hit to U.K. economic growth over the next two years, Britain’s fiscal watchdog has warned. Setting out the U.K.’s latest fiscal statement on Wednesday, Chancellor Rachel Reeves acknowledged that “the global economy has become more uncertain, bringing insecurity at home, as trading patterns become more unstable and borrowing costs rise.” As a result of Trump’s tariffs, there is “a growing realization that we could be in for a major blow to trade that wasn’t there,” added David Miles, an economist at the U.K.’s Office for Budget Responsibility (OBR) watchdog. Trump plans to unveil fresh reciprocal tariffs against U.S. trade partners next week. While the U.K. is currently working on a trade agreement to swerve those tariffs, Trump’s global trade measures will still impact Britain’s economy even if it is spared. “If global trade disputes escalate to include 20 percentage point rises in tariffs between the USA and the rest of the world, this could reduce UK GDP by a peak of 1 per cent,” the OBR forecasts in its latest assessment. Amping up U.S. tariffs on all goods imports would slash 0.6 off the OBR’s forecast of 1.9 percent GDP growth in 2026. Forecasting of a more extreme scenario predicts that 1 percent would be shed from Britain’s growth figures if it and other nations like China, the EU and Canada retaliate against Trump’s tariffs, resulting in an all-out global trade war. Chancellor Rachel Reeves acknowledged that “the global economy has become more uncertain, bringing insecurity at home, as trading patterns become more unstable and borrowing costs rise.” | Anthony Devlin/Getty Images “In addition to the direct impact of higher tariffs, there is an increase in trade policy uncertainty which further dampens economic activity in the first few years of the scenarios,” the fiscal watchdog finds. Transitory inflation from the shock of tariffs would also weigh on the economy. “Both U.S. and other countries’ trade policies have been subject to frequent changes over recent weeks and the future direction for trade policy is highly uncertain,” the OBR said. “Economic theory and empirical evidence suggest that higher tariffs reduce the trade intensity of output and so reduce productivity and real GDP over the long run.”

Mujtaba Rahman is the head of Eurasia Group’s Europe practice. He tweets at @Mij_Europe. When it comes to the spring statement from Britain’s Chancellor of the Exchequer Rachel Reeves, one thing is certain: It won’t be the one she originally intended. The U.K.’s economic clouds have darkened considerably since Reeves’ first budget last October. Despite higher inflation and wages boosting government tax receipts, lower than forecast growth and higher than expected government borrowing costs have wiped out the slender £9.9 billion fiscal headroom Reeves gave herself against her fiscal rules — notably, to balance the current budget by 2029–2030. Furthermore, in an unwanted backdrop to Wednesday’s upcoming statement, the U.K.’s GDP fell by 0.1 percent in January, down from a rise of 0.4 percent in December. And government officials expect the Office for Budget Responsibility to downgrade its forecast of 2 percent growth this year to around 1 percent. This means financial markets are watching Reeves closely. The wobble that saw government borrowing costs rise in January (before falling back down) was a sign the chancellor still has to prove her mettle. She thus wants to take immediate action on Wednesday, showing her “ironclad” rules are still “nonnegotiable” and she’s determined to meet them. In her statement, Reeves isn’t expected to raise taxes, but she will likely cut her proposed rise in overall public spending of 1.3 percent per year in real terms from 2026 to 2027 to about 1 percent instead, saving a further £5 billion a year. The details of the squeeze will be included in her government-wide spending review in June. Significantly, the chancellor had to head off criticism from fellow members of Prime Minister Keir Starmer’s cabinet during its March 11 meeting. In the first direct challenge to Reeves’s authority since last year’s general election, about half of the 22-strong cabinet expressed concern over the impact her fiscal rules will have on departmental budgets, including £5 billion in cuts to welfare spending — her main route to meeting her objectives, along with government efficiency savings. Importantly, Keir Starmer continues to back Rachel Reeves, so the cabinet ultimately did restate and reinforce its support for her fiscal rules. | Pool photo by Frank Augstein via AFP/Getty Images Those expressing reservations included Deputy Prime Minister Angela Rayner, Home Secretary Yvette Cooper; Energy Security and Net Zero Secretary Ed Miliband, Justice Secretary Shabana Mahmood and Leader of the House of Commons Lucy Powell — all of them powerful figures. Some ministers also cited Germany’s recent landmark decision to relax its fiscal rules in order to boost defense and infrastructure spending. But Reeves hit back, reminding that Germany’s national debt stands at 62 percent of GDP compared to the U.K.’s at 95 percent. Reeves believes the U.K. is susceptible to interest rate changes, as well as a rise in borrowing costs in line with what happened in Germany, which would add £4 billion to the country’s debt interest payments — already running at £100 billion in the current financial year. Importantly, Starmer continues to back Reeves, so the cabinet ultimately did restate and reinforce its support for her fiscal rules. However, the welfare cuts will continue to prove highly controversial with many Labour MPs, who are likely to intensify a wider internal debate over what the party stands for. Although Starmer has won party praise for his response to developments regarding Ukraine and his handling of U.S. President Donald Trump, a growing number of MPs worry the prime minister is shifting to the right, in an attempt to head off the threat from Nigel Farage’s Reform UK party. Additionally, some party loyalists worry Starmer’s Labour is more right wing than former Prime Minister Tony Blair’s.   There will, therefore, continue to be calls from within the party to introduce a wealth tax, or to revisit Labour’s manifesto pledges of not raising income tax, national insurance or VAT, on the grounds that the facts have changed in this new geopolitical order. But Reeves is unlikely to do so. Further tax rises — on top of the £40 billion in last October’s budget — would be politically painful and could harm economic growth. So, the chancellor hopes to square the circle by filling the gap with welfare cuts and government efficiency savings instead. Although many of her pro-growth measures will only come to fruition in the long term, Reeves hopes that, with inflation and interest rates under control, the markets will acknowledge she’s created stability and that investment will pick up in the short term.  Ultimately, though, it will all hinge on getting higher growth. This is a gamble — but for now, Reeves will continue to argue there’s no other way than to take the bet she’s making.

FRANKFURT — Germany’s historic turnaround on public spending has sent shockwaves through financial markets, sending the euro and government borrowing costs sharply higher. The euro shook off its usual fears about economic stagnation and Europe’s strategic vulnerability to surge against the dollar in early trading on Wednesday, while the German government’s 10-year borrowing costs leaped by nearly a quarter of a percent to their highest in 17 months, as investors raced to factor in the game-changing impact of hundreds of billions of euros in spending on defense and infrastructure projects.  The moves are a reaction to the announcement late on Tuesday that Germany’s chancellor-in-waiting Friedrich Merz had struck a deal with his prospective coalition partners the Social Democrats (SPD) to effectively bypass a constitutional cap on the budget deficit. That news came on the same day that European Commission President Ursula von der Leyen proposed raising hundreds of billions more to restore Europe’s defense capacity. “Europe and Germany in particular are showing a historically unprecedented responsiveness to revising the fiscal stance,” said George Saravelos, head of global FX strategy at Deutsche Bank.   Prospects of a fiscal “bazooka” pushed the single currency up 0.7 percent against the dollar to 1.0722, the highest since November. Saravelos expects the rally to continue until at least the euro hits 1.10. And while not everyone is that enthusiastic, analysts have quickly dropped predictions that Europe’s weak economic outlook could push the euro down to parity with the greenback this year. Merz’s plans, which will largely exempt defense spending from the so-called debt brake and also include a €500 billion special fund for infrastructure spending over the next 10 years, still have to pass parliament later this month. To this end, Merz and outgoing Chancellor Olaf Scholz will still have to win over the Greens, which is widely expected to happen. WHATEVER IT TAKES “In view of the threats to our freedom and peace on our continent, ‘whatever it takes’ must now also apply to our defense,” Merz said on Tuesday, reviving the phrase of then-European Central Bank President Mario Draghi that proved to be the turning point in Europe’s sovereign debt crisis a decade ago. Tuesday’s deal signaled a radical departure from the obsession with debt sustainability that has characterized German policy since the global financial crisis — and arguably before then. While economists still want to see its small print, they’re in no doubt of its transformative potential. “Pending more clarity on this issue, and being mindful of some execution risk, we believe this is one of the most historic paradigm shifts in German postwar history,” said Robin Winkler, chief economist at Deutsche Bank Research. Berenberg Chief Economist Holger Schmieding welcomed that “Germany is finally taking on the leadership role” and expressed hope that the new government will find the courage to enact the pro-growth supply-side reforms at the same time, to boost private as well as public investment. Christian Democratic Union/SPD deal would allow Germany to finance 4 percent of gross domestic product in debt at any time. | John Macdougal/Getty Images “The can-do attitude shown tonight could lift sentiment and pull in private investment, even before fiscal policy gets going,” added J.P. Morgan economist Greg Fuzesi, who said he expects a “material change” to Germany’s economic outlook after two straight years of recession. NO FREE LUNCH Other things being equal, said Barclays economist Balduin Bippus, the move should reverse the downward pressure that German fiscal policy has put on the euro since 2009, when Angela Merkel introduced the debt brake. However, he added with an eye on the looming trade war with the United States,“what complicates things is that at present all else is not equal — in a rather extreme way.” The imposition of import tariffs by the U.S., and the effect that this may have on the U.S. economy, works “at cross purposes” with the German news, making it harder to say how much higher the euro can go, Bippus said. What is clear is that the brave new world of fiscal largesse will also have a cost. Germany’s borrowing cost surged following the announcement with the yield on the 10-year note rising more than 20 basis points to above 2.7 percent, marking the biggest jump since June 2022. That had the knock-on effect of pulling borrowing costs for all eurozone governments up in parallel. German 30-year yields were on course for their biggest one-day rise since the late 1990s. To some, that’s an alarming reminder of why the debt brake was there in the first place. Friedrich Heinemann, an economist with the ZEW think tank in Mannheim, warned that the reform is going too far and risks debt levels spiraling out of control. He noted that, in total, the Christian Democratic Union/SPD deal would allow Germany to finance 4 percent of gross domestic product in debt at any time. “This would quickly put Germany among the highly indebted countries of the EU, and the debt-to-GDP ratio will reach 100 percent as early as 2034,” Heinemann warned. “Today is the day when the debt brake will become history,” lamented Lars Feld, an adviser to former Finance Minister Christian Lindner, whose opposition to looser fiscal policy sparked the collapse of the last federal government. “Germany will lose its function as a safe haven for bondholders,” Feld said. “Interest rates and inflation will not remain unaffected.”

BRUSSELS — The European Commission greenlighted Hungary’s medium-term fiscal-structural plan on Thursday after Budapest provided the bloc’s executive with updated and previously missing data. Hungary is now forecast to exit the additional surveillance regime for overspending countries in 2026. According to the new document, the country’s deficit — the difference between budget revenues and expenditures — is set to be 3.6 percent of GDP in 2025 and 2.5 percent the following year, below the EU’s 3 percent threshold. The country’s overall debt is expected to amount to 68.2 percent of GDP by 2028. EU envoys decided on Wednesday to postpone until February a vote by finance ministers on the previous recommendations for Hungary in light of the Commission’s new assessment, four diplomats and one Commission official told POLITICO. The updated plan — with data Hungary provided on Dec. 20 — shows “a more favorable initial fiscal position,” higher inflation, and “a better-than-expected budgetary outcome for January-November 2024, in particular higher-than-expected non-tax revenue and slightly lower-than-expected expenditure,” the Commission wrote in its assessment. The executive also underlined that the plan does not include “a fully-fledged and quantified fiscal strategy.” On the contrary, there are a “number of unquantified deficit-increasing measures across different areas,” so “further fiscal measures may thus be needed to achieve the commitments.” The plan also presented a slate of 132 reforms and investments aligned with the EU’s common priorities, more than half of which will be funded by EU programs. As with other overspending countries, Hungary is to present a report on the steps it has taken to meet the EU’s fiscal targets by the end of April.

ROME — When darkness descends and the stone pines are no longer visible through the windows of San Giovanni Addolorata Hospital, nighttime in the emergency wards reveals a health service verging on breakdown.  Trolleys bearing elderly patients spill out into the corridors. A nurse grows visibly exhausted as she is forced to juggle several wards by herself. With no beds available, a sickly twenty-something curls up to sleep on the floor. It looks like a scene out of the Covid-era — but four years later, San Giovanni Addolorata’s situation is typical of Italian hospitals.  In recent weeks, the stress on Italy’s health care system has come to the fore after the government’s latest budget proposal appeared to abandon major spending plans for the sector in the context of a broader fiscal squeeze, one of many across Europe. Enraged and overworked, thousands of health care workers are set to strike this Wednesday.  Many in the sector had hoped for measures to improve low pay, onerous conditions and staff shortages. Health Minister Orazio Schillaci had trumpeted an extra  €3.7 billion in health care spending in next year’s budget, and Prime Minister Giorgia Meloni had promised that ordinary Italians would be spared the worst effects of any cuts. But critics say the measures that made it into the final text were really worth just over €1.2 billion, well below what they argue is needed to keep the system afloat. The increase in funding in absolute terms is “flaunted as a great achievement, but is in reality a mere illusion,” Gimbe Foundation president Nino Cartabellotta told a parliamentary budget committee earlier this month.  He predicted that even the best run health authorities will have to cut services. The unions, meanwhile, have blasted the government for failing to budget for an increase in hospital hiring capacity, even after it was enshrined in law earlier this year. Lawmakers can still push for amendments until December. Schillaci, however, has defended the budget in parliament, saying his ministry inherited a system run down by years of cuts. Prime Minister Giorgia Meloni insisted last week that the proposed spending was an increase both in absolute terms and adjusted for inflation, adding that billions had been earmarked for wage increases until 2030.  “Creeping privatization” Watchdogs argue that the hole in resources is putting the nation’s health at risk, with some 4.3 million Italians reportedly renouncing treatment because of waiting lists (these can last up to 715 days in the case of ultrasound appointments). Elly Schlein, leader of the center-left Democratic Party, told POLITICO the government had broken its promises, condemning the “dangerous disinvestment” in public health care, and “creeping privatization.”  “The welfare state is in great crisis,” said Pierino Di Silverio, a Naples-based surgeon and the national secretary of medical union Anaao. “It’s a pillar of our social model — and it’s being progressively de-financed.” Certainly, the original aspiration underlying Italy’s National Health Fund — to provide universal coverage, funded by general taxation — is struggling to survive. Italy’s rapid population ageing — nearly a quarter of Italians are over 64 years old — means  that demand for services is growing much faster than the tax revenues needed to pay for them.  Against that backdrop, the share of services provided privately has grown steadily over the last decade, and now accounts for around a quarter of all health spending in the country. But the growth of a parallel private system has inevitably drawn away resources — including key staff — from the state sector. Workers in the state system are leaving, either to the private sector or abroad, at a pace of 14 a day, said Di Silverio.  Health Minister Orazio Schillaci had pledged an extra  €3.7 billion in health care spending in next year’s budget. | Fabio Frustaci/EFE via EPA That is compounding historic problems with the uneven distribution of funding across the country, which has tended to entrench divisions between the rich north and the poor south.   The issue is especially severe, Di Silverio said, in emergency wards, which now have up to 100 patients per doctor. The system is “so underfunded and badly equipped that people spend days in the emergency room,” recalled one medic at a major hospital in northern Rome, speaking on condition of anonymity as she wasn’t permitted to speak to the press. With patients often consigned to little more than a chair, the staffer said, frustrated relatives are known to assault overworked doctors, promoting more staff departures and increasingly dire conditions. “Nobody wants to do emergency medicine,” she said. Dead on arrival  Part of the budget strain is thanks to tough EU fiscal rules, brought back this year in a new form after being suspended during the pandemic. As a result of its enormous debt (now standing at nearly €3 trillion, or 139 percent of GDP) and an uncontrolled surge in deficit spending, Italy — along with several other countries — must now cut its deficit by at least 0.5 percent of GDP annually for up to seven years or face sanctions. But while the rules offer some leeway for increased funding on defense and the green transition, they have little or nothing to say on health. That lack of protection, critics argue, is bringing the state health system closer to breaking point.  Italy isn’t alone among EU countries pushed into difficult public spending trade-offs to rein in debt, and the Organization for Economic Cooperation and Development (OECD) notes that the Italian health care system is not all bad, boasting the third highest healthy-life expectancy as well as above-average spending on prevention.  But fiscal constraints have ensured that overall spending on health has fallen as a share of GDP since 2009, in contrast to most European countries, which have done better in accommodating the needs of graying populations.   Analysis by the Gimbe Foundation, an independent watchdog, suggests spending on the National Health Fund, specifically,will now fall to 5.7 percent of GDP by 2029, from 6.1 percent this year and well below the 7 percent recommended by the authors of a recent study published in The Lancet.  Overall spending on health, at 9.0 percent of GDP, is more than two full percentage points below the level in France, Germany and the U.K, according to OECD data.   That’s partly because Italy has to spend so much more on servicing its existing debts.  Raffaele Nevi, an MP with the center-right Forza Italia party, part of Meloni’s government, insisted that it’s essential to stick to the rules, to rebuild Italy’s credibility with financial markets and keep its future borrowing costs low. Despite the huge budget gap, the infamous ‘spread’ between Italian and German bond yields is currently as low as at any time since the European Central Bank stopped its net buying of government debt.  Do not resuscitate  To opposition figures and union leaders in negotiations with the government, the disappointment marks a covert return to the kind of austerity policies that have left much of Italy’s infrastructure crumbling or broken in recent decades. In the latest budget draft, outlays for new parents, pensions and teachers were also much smaller than expected. Schlein, the opposition leader, blasted as “unacceptable” a pension increase that amounts to just €3 a month, while government departments and local councils are gearing up for several billion euros in cuts. “They say they’re constrained by the European Union,” grumbled Guido Quici, president of the doctors’ union Cimo, recalling conversations with government officials.  Quici also expressed frustration that sectors with more powerful lobbies — or EU mandates — were barely scratched by the budget. Banks and insurers will only suffer a temporary shortfall, the tobacco industry avoided long-called-for tax increases. Military spending, meanwhile, is set to rise by over €2 billion each year on average until 2039, after three decades of withering on the vine. Some argue that the Italian situation reflects a broader loss of interest in health care and welfare amid a growing push for investments in hotter sectors. An influential report authored by former Italian PM Mario Draghi earlier this year, seen in Brussels as an economic blueprint for the next decade, makes only passing reference to health, focusing on developing new technologies. A spokesman for the European Commission said it was “assessing Italy’s draft budget plan and medium-term fiscal plan” and will present its assessment before the end of November. “My feeling,” said Yannis Natsis, director of the European Social Insurance Platform, a Brussels-based industry group, “is the [EU-wide] health budget will be significantly reduced because of other competing priorities like defense, security, and the industrial agenda.” Rory O’Neill contributed to this report.