Cabinet approves €29bn budget flexibility request for energy and defence
The Council of Ministers has approved the Public Finance Planning Document and a request for €29bn in budget flexibility spread across 2027 and 2028. The government will ask Parliament to authorise extra spending worth 0.3% of GDP for energy investments and 0.3% for defence in each of the two years, a move that pushes the deficit above the 3% EU threshold but may still allow Italy to exit the excessive deficit procedure.
Economy Minister Giancarlo Giorgetti announced the figures after the cabinet meeting. The €14bn annual deviation for the next two years represents about seven billion for each category — energy and defence — per year. Giorgetti described a "complex" context marked by inflation and interest rate uncertainty, and said the government had adopted a "slightly more prudent" stance than previously discussed.
Public accounts to exceed EU limits
The deficit is projected to stay below 3% in 2026, at 2.9%, before rising. With the additional spending permitted by EU flexibility rules, the shortfall reaches 3.4–3.5% in 2027 and 3.2–3.3% in 2028, then falls to 2.3–2.4% in 2029. Giorgetti told reporters that if the 0.6% deviation for energy and defence is stripped out, the underlying deficit remains under the 3% ceiling.
"The decimals make the difference," Giorgetti said. Italy remains under an EU excessive deficit procedure after recording a 3.1% gap in 2025, and the figures for 2027 and 2028 will determine whether Brussels agrees to close it.
Public debt follows a similar path. The debt-to-GDP ratio is forecast at 138.1% at end-2026, peaking at 138.5–138.6% in 2027, before declining to 137.7–137.9% in 2028 and 136.3–136.6% in 2029. Growth estimates were revised upward: GDP is now expected to expand by 1% in 2026, up from the 0.6% forecast in April, slowing to 0.8–0.9% in the following years.
Coalition reacts to scaled-back defence spending
The total flexibility request is smaller than the €36bn the government had discussed a month ago. Giorgetti confirmed that defence spending was trimmed by about €7bn, or 0.3% of GDP, from earlier plans. Defence Minister Guido Crosetto said he "understood perfectly the reasons" for the reduction but hoped conditions in 2027 might allow an increase.
The Lega expressed satisfaction that energy investments had been brought up to the same level as security spending. Party officials have pushed for weeks for measures including a flat tax on salary increases for young workers and an early retirement option at age 64.
Forza Italia, after a leadership meeting, said it had "many proposals" focused on reducing the tax burden. Party leader Antonio Tajani told reporters he expected a deviation of around €7bn andHope for a budget that is "not restrictive." The party is pressing to extend the 33% IRPEF rate to incomes up to €60,000, from the current ceiling of €50,000.
Noi Moderati prioritised younger workers, proposing "zero taxes" for newly hired employees under 30.
European Commission response awaited
The flexibility request now goes to Brussels. The Commission has already allowed member states to exceed deficit limits by up to 1.5% of GDP annually for defence spending through 2028. In August, it added that up to 0.3% of GDP per year could fund investments that reduce dependence on fossil fuels — heat pumps, solar panels, storage systems and nuclear — though not subsidies for petrol, diesel or gas.
A Commission spokesperson, Paula Pinho, said on 1 October that member states had "already been granted extra flexibility," a response interpreted in Rome as cautious. The government's formal request is under examination, with a decision expected at an Ecofin meeting later in October.
Parliament vote due by mid-October
Parliament must approve the deviation request by 13 October, requiring an absolute majority. The budget document must reach Brussels by 15 October, with the full budget bill presented to the Chamber of Deputies by 20 October.
The cabinet also approved an environmental decree with urgent provisions on environmental impact assessments, climate management, the circular economy and remediation, along with a constitutional bill to update the special statute of the Friuli-Venezia Giulia region.
