Flexibility for Italy, the ECB and the tobacco industry: the three hot-button issues on the agenda in Brussels

The green light for the greater budgetary flexibility requested by Italia, the debate over who will succeed Christine Lagarde as head of the ECB, and the attempt to reach an agreement on the reform of tobacco taxation.

These are the three issues at the centre of the Eurogroup and Ecofin meetings scheduled for Monday in Brussels.

Italia is awaiting approval of its request to activate the Extended National Exception (NEC) clause, which will allow Rome to benefit from greater flexibility with regard to the spending constraints set out in the Stability Pact for investments in defence and energy security.

The derogation will allow for a temporary deviation from the limits on net expenditure growth, without altering the European rules on public finances. A senior European official has once again ruled out the possibility that further revisions to the economic governance framework are under consideration. According to the provisions of the Italian budget, the activation of the National Exception Clause (NEC) will allow Rome to increase expenditure by up to 0.6 per cent of GDP in each of the years 2027 and 2028, divided between 0.3 per cent for defence and 0.3 per cent for energy security. This represents a total flexibility of around 29 billion euros over the two-year period, equivalent to approximately 14.5 billion per year.

Meanwhile, the Eurogroup, chaired by Kyriakos Pierrakakis of Greece, will take stock of the race for the presidency of the European Central Bank, following Lagarde’s decision to step down on 7 February 2027. By the deadline, two official nominations had been received: that of Pablo Hernandez de Cos from Spain and that of Klaas Knot from the Netherlands. Monday’s discussion will serve as an initial political assessment.