Deviation without breach

Following the shock caused by Istat’s certification that the 2025 deficit stands at 3.1 per cent, and once the immediate reactions – which ranged from accusations of unpatriotic behaviour levelled at the statistics institute to calls for ‘budget deviations running into the billions’ – had subsided, there are those within the government seeking to restore a sense of rationality. The aim is to draw up a pre-election Budget Bill without throwing away a whole parliamentary term’s work on fiscal consolidation. It falls to the Minister for the Economy to weave this together. Giancarlo Giorgetti explained yesterday that the activation of the safeguard clause for energy and defence expenditure (amounting to 36 billion, or 1.5 percentage points of GDP) would have been “a foregone conclusion and automatic” in the event of a deficit below 3 per cent, whereas now “it requires an interpretation on which we have been working for some time”.

The activation of the NEC (National Escape Clause), in fact, complicates and delays the exit of countries subject to infringement proceedings. However, within the maze of European rules, it is possible, through dialogue with the European Commission, to find a reasonable solution that does not penalise a country such as Italy, which has put its finances in order. All the government would need to do is meet the 2.9 per cent deficit target for 2026, pass a Budget Law in line with the path agreed with Brussels under the Stability Pact, and activate the NEC for energy and defence for 2027 and 2028. In this way, come spring – barring any surprises from the Istat notification – the Commission could certify Italy’s exit from the infringement procedure. If the government were also to use all the SAFE funds for defence, it could free up further budgetary leeway alongside the activation of the safeguard clause. Giorgia Meloni could present herself to the electorate with the public finances in order, having brought the country out of the infringement procedure, and a budget that allows some scope for consensus-building policies. However, she will have to resist, together with Giorgetti, the temptation to opt for a major ‘deviation’ in order to triumph at the polls at the cost of breaching the budget.