Italy posted better-than-expected quarterly growth on Monday, a surprise boost for new Prime Minister Giorgia Meloni who is – for now – staving off an expected recession in Europe’s third-largest economy.

In the third quarter, gross domestic product (GDP) grew 0.5 percent from the second quarter, compared with a slight decline expected by the previous Mario Draghi government.

That increase — according to preliminary estimates by national statistics institute Istat — topped the euro-zone average with a rise of 0.2 percent and the 0.3 percent that Germany published on Friday.

Oxford Economics’ Nicola Nobile told AFP this was due to an increase in “household consumption, particularly in services such as tourism”.

“But like other countries in the euro zone, Italy should enter a recession this winter amid rising interest rates and inflation,” he said.

Regardless, the quarterly surprise comes at the right time for Meloni, leader of the post-fascist party Brothers of Italy, whose first budget is due to be presented to the European Commission by the end of November.

During her first visit to Brussels on Thursday, where she will be received by European Commission President Ursula von der Leyen, Meloni is said to have agreed to curb the deficits while keeping the costly election promises made by her right-wing coalition.

Coming from a historically Eurosceptic party, her election was closely watched elsewhere in Europe.

The balancing act for Italy – the first beneficiary of the EU’s post-Covid stimulus package – is taking place against a global backdrop of rising interest rates, record inflation, the energy crisis and war in Ukraine.

During the election campaign, she promised not to inflate the budget of a country that had long been plagued by low growth and enormous debt.

But while the Draghi government forecasts a public deficit of 3.4 percent of GDP for next year, Giorgia Meloni plans to raise the bar.

According to the Italian press, it is aiming for a deficit of 4.5 percent, ie another 21 billion euros to be financed through debt.

A large part of the budget will be used for measures aimed at mitigating rising energy prices for businesses and households, the new government’s top priority.

At the top is Economy Minister Giancarlo Giorgetti, who served as Economic Development Minister under Draghi and is considered a moderate in Matteo Salvini’s far-right league.

The flagship measure of the coalition, the 15 percent withholding tax for the self-employed to 100,000 euros annual income instead of the previous 65,000 euros, could initially be limited and then extended to other incomes.

Funds must also be made available to lower the retirement age, which without new measures would automatically rise from 64 to 67 in 2023, as envisaged in a 2011 reform.

Salvini has proposed recovering a billion euros with a six-month hiatus of Italy’s controversial basic income – a minimum payment that will benefit Italy’s poorest, including the unemployed, people unable to work due to disabilities or pensioners living under a basic income.

Salvini’s controversial austerity proposal is to cut income for six months to an estimated 900,000 benefit recipients who are able to work but are currently unable.

But the last word will go to Giorgia Meloni.

The challenge for the prime minister will be to “ensure the support of the league while partially neutralizing its leader,” Salvini, who could undermine the “serious image” Meloni wants to project, said Sofia Tozy, an analyst at Credit Agricole.