Defence at the heart of the 2026 agenda: target of 12 billion by 2028

There are two main strands of defence investment on the table. One is financed with EU loans from the 'Safe' programme, which can allocate Rome up to 14.9 billion out of the total 150 put in place to 'accelerate Defence Readiness by enabling urgent and substantial investments in support of European industry', as the official EU lexicon puts it. "This is not a matter of additional resources," Defence Minister Guido Crosetto clarifies in the ministry's latest policy document, but of a "more advantageous financing modality than ordinary public debt".

The domestic chapter, to be fuelled by national funds, is larger, however, and above all, it is not a one-off but a structural one: because according to the government's own indications, it aims to increase military spending by 12 billion a year by 2028 compared to the trend tracked so far, with an initial 3.5 billion milestone set for this year.

Tensions in the majority

Discussions in Parliament and in the country, and even within the confines of the majority and the government itself, are set to be heated, as shown by the little prologue offered at the end of December by the decree-law with the new extension of support for Ukraine. The passage appeared decidedly less complex, limited as it was to the substantial confirmation of the commitment in favour of Kiev that the Draghi and Meloni Governments had so far carried out with continuity; but it proved to be more than enough to ignite a heated debate in the majority on the title and text of the measure, and to generate in the League a lively 'internal debate' that has not yet died down.

The impact on the Italian budget

The arms decree that closed the 2025 activity of the Council of Ministers is to be converted into law by the end of February. But soon the Chamber of Deputies and the Senate will also be convened to discuss 'the planning of additional military spending' that the government has 'undertaken to submit to Parliament as soon as possible, presumably at the beginning of the next financial year', as stated on page 63 of the Public Finance Planning Document approved by the Council of Ministers on 2 October 2025. In that document, on which the Houses of Parliament are expected to pass a resolution, there will also be 'an estimate of the repercussions on the economy' expected from the extra military spending, which will only partly involve domestic industry; with plans already being drawn up, in particular with the Treasury's investee companies active in the sector.

The precondition for the further increase of the weight of defence in the public budget is the early exit from the EU excessive deficit procedure, which will be certified by Eurostat in April with the final calculation of the 2025 deficit below 3 per cent of GDP (so far the estimates discussed in Brussels have spoken of 2.98 per cent).

In fact, the separation of the procedure makes it possible to exclude the additional financial commitment from the constraints of the EU Pact on net primary expenditure, avoiding the Gordian knot in which any increase in expenditure on arms and cybersecurity would subtract equivalent margins from other items, from health to welfare. But accounting unbundling is not a liberation from the constraints of reality, and in particular from the need to issue additional government bonds to finance new spending. This is also why the plan studied at the Ministry of the Economy outlines a gradual growth of extra commitments, which from the 0.15 per cent of GDP (3.5 billion) hypothesised for this year will only reach around 12 billion (0.5 per cent of GDP) in 2028. This step-by-step path would prevent the overall deficit (including the 'unbundled' share) from returning above 3% of GDP in the coming years, confirming the fact that accounting details are of relative value when it comes to turning to the markets to borrow money. That indicated is a 'realistic projection', claims the public finance programme, designed also taking into account 'the necessary adjustment times of production capacity', which advise avoiding 'abrupt accelerations' of an expenditure otherwise largely destined for foreign clients.

Equally complex is the actual start-up of 'Safe', which aims to fuel joint procurements between at least two countries (barring derogations) to build a first draft of integrated defence at EU level. It remains to be seen how much of the plans already constructed by Italy can hook into this alternative form of financing, full of conditionalities as is always the case with Community instruments: characteristics that make it a 'rocket Pnrr', as defined by the Lega Nord's Claudio Borghi, who is also effective in conveying the lack of enthusiasm nurtured in the Carroccio.