Key facts
- Italy plans to use the EU's 'escape clause' to fund energy-relief measures.
- The measures are intended for families and businesses in 2027 and 2028.
- The EU Commission allows member states to increase defense spending by 1.5% of GDP annually through 2028.
- A compromise allows 0.3% of GDP to be used for green energy transition investments.
- This move may indicate Italy will not meet its deficit reduction targets.
Italy plans to leverage the European Union's 'escape clause' from its budget rules to finance measures aimed at mitigating energy costs for households and businesses in 2027 and 2028. A statement from Prime Minister Giorgia Meloni's office indicated broad agreement among coalition figures on this proposal.
The EU Commission had previously allowed member states to increase defense spending by up to 1.5% of GDP annually through 2028 without triggering disciplinary action, following Russia's invasion of Ukraine. Italy had advocated for fiscal leeway to address rising energy costs.
As a compromise, the Commission recently decided to permit EU countries to allocate 0.3% of GDP, drawn from the defense spending leeway, towards investments supporting the transition from fossil fuels to green energy. Meloni's plan to invoke this clause a year before the 2027 general election suggests a potential departure from Italy's objective to bring its budget deficit below the 3% of GDP ceiling and exit the EU's excessive deficit procedure. Under its current multi-year budget framework, Italy had targeted a deficit-to-GDP ratio of 2.9% for the current year and 2.8% for 2027.