Council of Ministers approves the DPFP and a 29 billion extra-budgetary deficit for energy and defence. Giorgetti: a more cautious approach to the budget
Public Finance Policy Document approved. 2026 GDP forecast revised to 1 per cent. Debt set to rise again in 2027 (138.5 per cent). Deficit, adjusted for the deviation, below 3 per cent. The government’s request for flexibility amounts to just over 14 billion for 2027 and 2028, divided equally between the two expenditure items each year. Deficit, adjusted for the deviation, below 3 per cent.
Key points
- Giorgetti: deficit adjusted for deviation below 3%
- GDP for 2026 revised upwards to +1 per cent, debt at 138.1 per cent
- “We should take a more cautious approach to the budget; the current situation calls for caution”
- “We are not asking for further flexibility, but for the impact of inflation to be assessed”
- Decree-law allocating 200 million for remediation work in the Terra dei Fuochi
The Council of Ministers has given the go-ahead to the Public Finance Policy Document (DPFP) and the report on the budget deviation. The agreement between the majority leaders on the partial use of the national safeguard clause for expenditure on energy and defence has therefore been formalised. The expenditure commitment for the extra deficit amounts to just over 7 billion per year for both items over the next two years, totalling 29 of the 36 billion projected in August, before Istat confirmed that the 2025 deficit had reached 3.1 per cent of GDP, preventing Italia from exiting the EU’s excessive deficit procedure.
This amounts to 0.3 per cent of GDP for defence and 0.3 per cent for energy in each of the two years. Compared with the initial plans, therefore, the defence budget has been scaled back by 7 billion (projected at 0.6 per cent of GDP in 2028). This solution satisfies those on the centre-right, such as the Lega, who were pushing for a substantial reduction in the budget allocated to security and rearmament.
It is no coincidence that sources within the Carroccio have expressed their appreciation for the fact that “investments to support citizens, households and businesses in tackling high energy and fuel prices have been increased by the Council of Ministers to match those allocated to security”. “Now,” they continue, “among Minister Salvini’s priorities are free travel and substantial discounts on public transport and trains for millions of students and commuters.”
The figures for the DPFP and the deviation, which will only be put to the vote on Tuesday 13th, will set out the framework for the budget.
Giorgetti: deficit, adjusted for the deviation, below 3 per cent
The activation of the clause, even if only partial, inevitably pushes up the deficit as well, which – after the 2.9 per cent of GDP confirmed for this year – will rise to 3.4 per cent next year, before edging down to 3.3 per cent the following year and falling to 2.4 per cent in 2029. With the strict application of EU rules – which do not allow countries subject to the excessive deficit procedure to exclude the extra deficit from their budget balance calculations – Italia would therefore only exit the corrective arm of the EU Pact in 2030. However, negotiations have been ongoing for some time with the EU on a more flexible approach, which Giorgetti seems to take for granted. ‘The deficit figures for 2027 and 2028 are above 3 per cent, but they must be adjusted for the deviation relating to defence and energy; consequently, if you adjust them by 0.6 per cent, you will find a figure below 3 per cent. The decimal places make all the difference, so the hope is to create that leeway,’ the minister stated. Net of the derogation, in fact, the deficit would see a slight decline to 2.8 per cent next year – confirming the trend forecast in April – and to 2.7 per cent in 2028.
