Italy's Meloni says caution needed on relaxing EU rules on state aid

ROME, Jan 30 (Reuters) - Italian Prime Minister Giorgia Meloni said on Monday that the European Union should be cautious when it comes to relaxing its rules on state aid for businesses.

The EU said in December it would adapt its state aid rules to prevent an exodus of investment triggered by the $430 billion U.S. Inflation Reduction Act, fearing it might lure away EU businesses and disadvantage European companies.

"Caution is needed on relaxing of state aid rules, the aim should be supporting businesses without risking to weaken the single market," Meloni told reporters after a meeting with European Council President Charles Michel.

Draft conclusions of the EU leaders' meeting scheduled for Feb. 9-10 said the bloc would back new funding for the green industry to counterbalance subsidies in the U.S. and China, as well as more flexible use of existing funds and looser state aid rules.

Meloni, who heads Italy's most right-wing government since World War Two, added the EU should have the courage to create a sovereign investment fund, adding that getting agreement among all 27 member states would not be easy.

"It is important to say we are moving in that direction," she said.

Reporting by Angelo Amante Writing by Keith Weir, editing by Alvise Armellini

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