Soaring construction costs prompt Italy to help out with 100 mln euro package
The Italian government has put aside 100 million euros to help building firms working on public projects as constructions costs go through the roof.
The move comes as the cost of basic construction materials, such as copper and timber, have soared by as much as 70 percent since the start of the year on the back of an improving global economy.
Under the Italian plan, companies will be eligible for compensation if prices of the most significant construction materials rise by more than 8% in the first half of this year, Reuters reported. But they also face having to refund the public administration if prices fall by more than 8%.
Italy’s measure applies to public tenders and the compensation must be primarily funded by contingency money the central and local authorities have set aside for the tenders.
The Italian Chamber of Deputies is expected to approve the government decree with the proposed changes in coming days. The legislation will also have to be passed in Italy’s upper house, the Senate.
The move is seen as helping provide support to infrastructure projects helping lead the Italian - and European economy -to a post pandemic recovery.
Industry executives, however, have warned that higher prices and shortages of building materials risk undermining the EU’s 800 billion euro economic stimulus program due to the large number of infrastructure projects involved. Construction accounts for some 10 percent of the region's total economic output.
Furthermore, higher building costs are threatening to pull the brake on advancing residential markets where property prices have been showing strong growth across Europe.
In 2020, housing prices in Italy jumped by the highest rate seen in ten years, while in Greece, residential real estate prices kept advancing despite the economy contracting by more than 8%.
In Cyprus, building officials estimate that the cost of constructing a home has risen some 20 percent recently, with some builders refusing to complete contracts unless they are covered for the price hikes.