Inflation hits 4.2% as government asks EU for budget flexibility
Italian consumer prices rose 4.2% in September compared with a year earlier, the fastest pace since September 2023, according to preliminary estimates from the Italian National Institute of Statistics (Istat). The jump, driven mainly by energy costs, has prompted Prime Minister Giorgia Meloni to formally request greater flexibility from the European Union on budget rules — a move she announced in a joint initiative with the Czech Republic.
The annual inflation rate accelerated from 3.3% in August, with energy goods prices surging 22.3% year-on-year. The increase reflects a fresh energy shock linked to tensions around the Strait of Hormuz, echoing the impact of the 2022 Ukrainian energy crisis on household bills.
What's driving prices higher
Energy is the dominant force behind the spike. Regulated gas prices alone jumped 47.2% on an annual basis, while diesel fuel rose 34.9% and heating diesel 38.5%. Electricity on the protected market held at +9.7%. The energy component alone accounts for more than half of the overall inflation reading.
Food prices are also starting to climb. Unprocessed foodstuffs rose 5.5% year-on-year, up from 3.8% in August, pushed by vegetables, legumes and bananas (+8.4%) and a reversal in fruit prices (+0.6%). The overall grocery basket is now up 1.7% annually, nearly double the previous month's rate.
Consumer associations estimate the added burden at roughly €1,100 to €1,400 per year for an average family, depending on household size. For a couple with two children, the increase could approach €1,900 annually, according to Codacons.
Italy turns to Brussels for flexibility
Meloni announced that Italy, together with the Czech Republic, has sent a joint letter to European Commission President Ursula von der Leyen asking for additional fiscal headroom to address the inflationary pressures caused by global energy costs. The Czech Republic's prime minister, Andrej Babiš, met with Meloni in Prague ahead of the initiative.
A spokesperson for the European Commission confirmed the letter has been received, according to the Italian news agency ANSA.
Meloni said she wants the issue addressed at the next meeting of EU finance ministers (Ecofin) and then at the European Council in two weeks. The request is that higher inflation be factored into EU deficit calculations, giving member states more margin to support families and businesses.
"We cannot act alone in a European context where others are still watching from the window," said Industry Minister Adolfo Urso, commenting on the inflation data. Urso added that Italy has long pushed for revisions to the EU Emissions Trading System (ETS), saying the urgency is still not perceived in Brussels.
Italy and the Czech Republic have in fact gathered support from 10 EU member states — including Poland, Hungary, Romania and Greece — for a joint declaration calling for a "pragmatic and fair" revision of the ETS. The group is asking, among other things, to reconsider the timeline for near-zero emissions targets and to suspend the phase-out of free emissions allowances until the new Carbon Border Adjustment Mechanism proves effective.
Political pressure over purchasing power
The inflation surge comes as the government prepares the 2027 budget law, expected to have a strong electoral focus. Meloni said the budget will remain focused on wages, purchasing power, business support and family incentives.
But wages are struggling to keep pace. Istat measured earnings growth at just 2.4% year-on-year in June, far below current price increases. With consumer and business confidence turning negative in September, the gap has become a political liability.
"Inflation is literally eating Italians' salaries," said Elly Schlein, secretary of the opposition Democratic Party (Partito Democratico). Christian Ferrari, confederal secretary of the CGIL trade union, warned of a "dangerous acceleration" in prices and called for contract renewals to adjust purchasing power, neutralization of fiscal drag, and taxation of extra profits.
The government's priority appears to be extending the 33% IRPEF tax rate to incomes up to €60,000 — a measure that would lower the tax burden for those currently in the 43% bracket. Also under discussion is a 5% flat tax on wage increases for younger workers, echoing a similar measure already in place for contract renewals in 2026.
That falls short of what some coalition partners had sought. The League (Lega) had pushed to extend the 15% flat tax for the self-employed, an idea that appears stalled. Economy Minister Giancarlo Giorgetti had also urged companies at a recent meeting in Cernobbio to view wages as an "investment," but the appeal has so far yielded little.
Context: What happens next
The budget law will be finalized in the coming weeks. Meloni has already activated existing EU flexibility clauses — up to 0.6% of GDP for energy investments and 0.9% for defense — but Monday's request goes further, seeking broader recognition that inflation driven by external energy shocks should not be treated as a purely domestic fiscal issue.
The Commission's previous responses suggest Brussels is open to flexibility for strategic investments, particularly in clean energy, but remains cautious about granting general derogations. The next Ecofin meeting and European Council will test whether Italy can build enough support among member states for a broader relaxation of fiscal constraints.
