Key facts
- Italy plans to increase spending on green energy and defense over the next three years.
- The EU has provided additional fiscal leeway by relaxing public spending rules.
- Rome will request to spend an additional 0.6% of GDP on green energy investments.
- Italy will request to spend an additional 0.9% of GDP on defense.
- The defense spending aims to support new multi-year investment programs and reallocate existing resources.
- The move is intended to reduce dependence on fossil fuels and move towards NATO's defense spending targets.
Italy intends to significantly increase its spending on green energy investments and defense over the next three years, leveraging newly relaxed fiscal rules from the European Union. Finance Minister Giancarlo Giorgetti informed parliament that Rome will formally request permission from the European Commission to allocate an additional 0.6% of its gross domestic product towards green energy initiatives and 0.9% of GDP towards defense.
Giorgetti stated that the defense spending would encompass both new multi-year investment programs and the reallocation of existing funds. This move is part of Italy's strategy to reduce its reliance on fossil fuels and align with NATO's defense spending targets. Currently, Italy allocates 2% of its GDP to defense, placing it among the alliance's lower spenders.
The EU's decision in June to offer more fiscal flexibility to member states facing energy crises, by exempting certain green investments from public spending rules, has enabled Italy's proposed increase. However, the plan to boost military spending is anticipated to create political friction within the ruling coalition, particularly with parties that have expressed reservations about increasing defense expenditures in response to perceived Russian threats.
Italy is expected to submit its formal request to the European Commission by a mid-August deadline. While the specifics of the green investments were not detailed by Giorgetti, the government is under pressure from various political factions. The exact utilization of EU loans for defense, another potentially divisive issue, also remains undecided.