Defence spending, how much the debt increases if Italy opens up to the EU flexibility proposal
Economy Minister Giorgetti sent a clear message: 'Now we will not use the exemption from the Stability Pact to finance defence spending'.
4' min read
Key points
- UPB: defence clause delays exit from EU procedure
- What this is about
- Where Italy is from
- The scenario in case of partial use of flexibility
- ... and that in case the maximum permitted level is reached .
- Bankitalia: Italy did not increase defence spending after Ukraine invasion
- "Rearmament left to individual countries without coordination can lead to inefficient spending"
4' min read
Europe is preparing for an unprecedented increase in defence spending, but Italy's high public debt has convinced the government to put the flexibility clause in the EU's ReArm Europe/Readiness 2030 plan to increase defence spending, at least for now, in the drawer, in the wake of what the Trump administration is demanding from the US. Economy Minister Giancarlo Giorgetti spoke out loud. Speaking in parliament to illustrate the new public finance document, he sent out a clear message: this is not the time to talk about budget slippage, even if it is to cope with tariffs or to increase defence spending, which, moreover, will already reach 2% of GDP this year according to Nato commitments. "I have been asked whether the waiver to the Stability Pact will be used for military spending, my opinion," he said, "is that at this time the Italian government will not use it. We believe it is correct and fair to wait for the NATO summit in June 2025 to see the general orientation. And then calibrating military spending means making choices'.
'The deviation,' he added, 'I had it put in the Constitution, that possibility is due to me. But it must not be the easy solution. Before providing for additional expenditure, even for defence or duties, I want to know where that expenditure is going and why I have to make it. This is a criterion not of prudence or rigour, but of the good father of the family and it is the criterion with which as long as I remain minister I will continue to manage the Ministry of Economy and Finance'.
According to Giorgetti, resorting to the EU loans of Safe ('Security and Action for Europe'), the new specific instrument for Security Action for Europe that will receive up to EUR 150 billion on the capital markets, using the consolidated unified funding approach to help EU member states rapidly and substantially increase investment in Europe's defence capabilities, 'is hardly attractive to anyone, so they will have to come up with something better in Europe'. In the prevailing uncertainty, the important thing, the minister made clear, is to maintain balance.
At the moment, Italy's target for 2025 is 1.57 per cent of GDP: 0.3 per cent more than in 2024, but still almost 10 billion away from the 2 per cent target. From 24 to 26 June, as anticipated by the minister, the heads of state and heads of government of the thirty-two members of the North Atlantic Treaty Organisation will meet in The Hague, and the threshold could be placed on 3.5 per cent. Meanwhile, Italy waits at the window.
UPB: defence clause delays exit from EU procedure
To understand what impact the decision to activate the safeguard clause granted by the EU to strengthen the defence sector could have for Italy, one need only look between the lines of the report presented by the UPB, the Parliamentary Budget Office, during its hearing on the Public Finance Document. The activation of the clause, in particular, could lead to a delay in Italy's exit from the excessive deficit procedure.
