Defence spending: from Giorgetti to Crosetto and Meloni – what are the positions within the government?

Back in May, Crosetto had already emphasised the need to be informed by the head of the Ministry of Economy and Finance regarding the decision to be taken on access to the fund, so that companies in the sector could finalise their contracts. No replies have yet been received: a sign that the government is still considering the matter, and is likely trying to work out the amount to request, which is probably lower than initially expected.

As regards the percentage increases in GDP to be allocated to defence spending, during Question Time, Mr Crosetto expressed the hope that the increase of 0.15–0.20 per cent of GDP might be included in the forthcoming budget debate this autumn.

And it is precisely the autumn budget that forms the backdrop against which the next phase of the battle over defence funding is being played out. The Minister for the Economy, who will play a leading role on this occasion given his position, has repeatedly made clear his stance on the Safe funds and on whether it is appropriate to apply for them in Brussels.

According to Giorgetti, access to European funds only makes sense if these billions are used to replace and finance items of expenditure that Italia has already included in its defence budget. The minister’s strategy is to take advantage of the preferential interest rates guaranteed by the European Union to save on interest costs compared with issuing standard government bonds, without, however, increasing the overall debt. Furthermore, for Giorgetti, Italy’s priority at European level is not only defence, but also protecting households and businesses from the impact of rising energy costs, partly as a result of the conflict between the US and Iran and the blockade of Strait of Hormuz. The minister has worked to ensure that a link is recognised at European level between the debate on the Safe and Italia’s request to Brussels for maximum fiscal flexibility in the wake of soaring energy prices.

Italia has received initial approval for the extension to the energy sector of the national safeguard clause already recognised for defence. The Commission’s proposal must now go to the European Council, and, above all, the scope of the measures eligible for funding under the derogation must be clarified. This derogation allows for up to 7 billion to be allocated to energy this year and a cumulative total of 14 in 2026–28 (0.3% and 0.6 per cent of GDP respectively) within the fiscal space (up to 35 billion, 1.5 per cent of GDP) hitherto reserved for security and rearmament (see also *Il Sole 24 Ore* of 4 June).

But the Minister for the Economy was not the only one to put the brakes on defence spending. Whilst acknowledging that it is necessary (it is ‘the price we must pay for our freedom’), Prime Minister Giorgia Meloni has decided to use the Safe dossier as a bargaining chip in negotiations with the European Commission. The reasoning was: until the EU granted Italia some leeway in managing expenditure to tackle high energy costs, Italia would avoid taking out new loans for defence (i.e. ‘Safe’). In the end, the European Commission responded with a partial ‘yes’ to the Prime Minister’s request to extend the exemption from the Stability Pact for defence to energy as well. It is now awaiting Italia’s response regarding the signing of the agreement to activate the Safe loans. The game continues.