European Commission backs Italy's request for defence and energy spending flexibility
The European Commission has given a positive assessment to Italy's request to activate the national safeguard clause for defence and energy spending, according to sources in Brussels. The decision, reached on 8 October, opens the way for the Council of the European Union to grant final approval within one month. Only after that step can the clause be officially activated.
A Commission spokesperson confirmed that the request, submitted on 11 September, had been evaluated and found not to endanger medium-term fiscal sustainability. Italy is the nineteenth member state to request activation of this instrument.
What the clause allows
The national safeguard clause, formally known as the National Escape Clause (NEC), permits member states to deviate temporarily from agreed budget rules to respond to exceptional circumstances. Under the Stability and Growth Pact framework, countries can increase public spending by up to 0.6% of GDP in total between February 2026 and the end of 2028.
Italy has requested flexibility worth approximately €29 billion over 2027–2028. The government plans to allocate roughly €14.4 billion for defence and €14.4 billion for energy infrastructure across the two-year period, evenly split between the two sectors.
The clause was initially introduced in 2025 for defence spending as part of a European rearmament plan following Russia's invasion of Ukraine. It was extended to energy in June 2026 in response to the growing energy crisis.
The process ahead
The dossier now passes to the Council, which has one month to grant definitive approval. If the timeline holds, the matter could be examined at the November meeting of the Economic and Financial Affairs Council (Ecofin). Greece's request is expected to be decided at this Friday's Ecofin meeting in Luxembourg.
The Commission's assessment found that activating the clause does not put Italy's public finances at risk in the medium term. Fitch Ratings commented that the planned increase in deficit spending reflects political judgments rather than a shift in fiscal direction, and noted that Italian public accounts have performed better than expected.
A separate debate on inflation-linked VAT revenue
Beyond the NEC request, Prime Minister Giorgia Meloni has asked Brussels for flexibility on how inflation affects budget calculations. The Stability Pact already allows for the impact of higher-than-expected inflation to be considered when assessing whether member states are meeting their spending paths, particularly within the excessive deficit procedure.
However, the issue of using extra VAT revenue generated by inflation is more complicated. The revised Pact rules were designed to prevent member states from automatically spending any unexpected windfall. Sources noted that while Italy is pressing for the ability to use this revenue — estimated at roughly €160–170 million — to help refinance fuel excise cuts, the framework is intentionally restrictive.
Commissioner Valdis Dombrovskis acknowledged that requests from Italy and Greece would be examined, but cautioned that "we cannot continuously introduce new fiscal flexibilities." Nevertheless, the Italian proposal reportedly gathered "numerous consensus" at the Eurogroup, despite traditional resistance from fiscally conservative member states.
Economy Minister Giancarlo Giorgetti expressed confidence that Italy's technical arguments would find space within European rule interpretations. The debate continues in Luxembourg at the Eurogroup and Ecofin meetings.
