The European Commission on Tuesday urged Italy to reform and invest rather than just drawing up a spending wishlist, as Rome formulated plans to tackle the economic challenge posed by the coronavirus pandemic.
EU leaders in July reached a historic agreement on a 750-billion-euro ($900-billion) coronavirus recovery plan, financed for the first time by joint debt.
Countries benefiting from the programme, including Italy which expects to receive 209 billion euros, must present their national recovery plans to Brussels by next month.
"I am confident that Italy has the potential for this challenge," EU economic commissioner Paolo Gentiloni said.
However a national plan must not be "a list of expenses but the necessary reforms and investments for a real relaunch," Gentiloni told a joint parliamentary committee hearing via a videolink from Brussels.
Even before the coronavirus crisis, Italy — the eurozone's third-largest economy with a 2019 GDP of 1.7 trillion euros — was floundering with years of anaemic growth and a heavy debt burden.
Rome said in July it expects public debt to reach over 157 percent of GDP this year, far higher than any other EU nation bar Greece.
Gentiloni, a former Italian prime minister, added that Italy as one of the first and hardest-hit countries by the pandemic, should not just use the "200 billion euros to cut taxes", ANSA news agency said.
"That would really send the wrong message," Gentiloni said.
Prime Minister Guiseppe Conte last month said Italy would present its proposals to counter the economic fallout of the coronavirus pandemic to the EU by mid-October.
They would "respond directly to the criteria of European funding" with "investment and structural reforms to make the country more competitive," Conte told the daily Il Fatto Quotidiano.
He said Italy would pay "great attention" to infrastructure and invest in schools, universities and research.
"We will also use the opportunity to improve the efficiency of public administration and justice," he said.
The EU agreement on a rescue fund finally came after several months of wrangling between southern Europe calling for solidarity in the face of the crisis and the so-called "frugal four" northern countries which opposed direct aid.
The deal was finally sealed after intense negotiations that saw threats of walkouts, vetoes and fierce opposition from the "frugal" Netherlands and Austria.
Germany and France strongly backed the package, which enables joint borrowing by the 27 members of the bloc to help virus-hit countries like Spain and Italy.