Key facts
- Italy plans to use the EU's 'escape clause' to fund energy-relief measures for 2027-2028.
- The 'escape clause' allows increased defense spending (up to 1.5% of GDP) and green energy transition investments (0.3% of GDP).
- Italy's economy minister expressed cautious optimism about revising the 2025 deficit downward.
- A lower 2025 deficit could allow Italy to exit an EU Excessive Deficit Procedure.
- The government may restore fuel excise duty cuts if prices remain high.
Italy plans to utilize the European Union's 'escape clause' from its budget rules to finance energy cost relief measures for households and businesses in 2027 and 2028. 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, 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.
Italy's economy minister, Giancarlo Giorgetti, expressed cautious optimism about a downward revision of the 2025 deficit, potentially bringing it below the 3% of GDP ceiling and allowing an exit from the EU's excessive deficit procedure. He noted that an estimate for the 2025 deficit could be lowered due to illicit activities related to home renovation tax incentives. 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. The government may also restore fuel excise duty cuts if petrol and diesel prices remain high.