Meloni, variable excise duties and the risk of the deficit exceeding 3 per cent once again

The long road to the Budget Bill has only just begun and is already proving bumpy. The suspension of the excise duty cut (-6 cents) was enough to inflame the opposition, who, in turn, are pressing the government to reconsider its decision. “We are ready to intervene again using the flexible excise duty mechanism,” said Giorgia Meloni. “As of September, we have around 170 million that can be spent on this objective.” The Prime Minister added that the government is “considering whether it is more effective to spend it now or keep it in reserve. It also depends on how the cap holds up.” (

Tension is at its peak over a few euro cents per litre of diesel, which nevertheless amounts to several hundred million euros that are crucial to the public finances: once again this year, the government is teetering on the brink of a 3 per cent deficit.

Yesterday morning, under pressure from the opposition’s fierce campaign, the government once again put pressure on the oil companies to persuade them to absorb the 6-cent price rise. Eni – which had been the linchpin of the government’s strategy with the introduction of the fuel price cap (€1.99 per litre for petrol and €2.19 for diesel) later emulated by IP, Q8 and Tamoil – initially raised the ceiling for diesel by the equivalent of the excise duty increase to 2.25 euros, before lowering it to 2.21 euros, absorbing 4 of the 6-cent increase.

Meloni would like the ‘Six-Legged Dog’ to absorb the remaining 2 cent increase as well, but given the current market tensions, it would be preferable to keep a close eye on the budget balances rather than the controversies on social media.

The €170 million ‘reserve’ of VAT windfall revenue accrued in September could prove vital in shoring up this year’s accounts, which are dangerously close to the 3 per cent limit. Minister Giancarlo Giorgetti explicitly stated that this target is not guaranteed when presenting the Dpfp: “The deficit should remain below 3 per cent in 2026, but as you know, our assumption alone is not enough.” The minister is referring to the recent setback regarding the exit from the infringement procedure – initially expected but then missed by a decimal point – which pushed the 2025 deficit to 3.1 per cent. The possibility that the government might face a nasty surprise next spring, similar to this year’s, is not entirely remote.

The Dpfp, in fact, forecasts a deficit-to-GDP ratio for this year of 2.9 per cent (more precisely 2.925 per cent), with net borrowing amounting to 68 billion euros. This means that, in order to exit the infringement procedure by 2027, the government has maintained a safety margin of 1.5 billion euros; exceeding this would push the deficit above 2.99 per cent (under European rules, the deficit must remain ‘below the 3 per cent of GDP reference value’, therefore a figure just above but rounded up to 3 per cent would still be excessive).

This is not a margin that allows for a peaceful night’s sleep. First and foremost because of the international context, characterised by the energy crisis, inflation and rising sovereign bond yields. It is no coincidence that Giorgetti, during the press conference to present the Dpfp, said that the government is “constantly and closely monitoring trends in both inflation and interest rates”. These factors alone could drive up the interest expenditure forecast for the final months of the year. What is more, the failure to exit the procedure for 2025 has shown that there is no shortage of surprises: between April and September, unexpected expenditure for 2025 – including the Superbonus and expenditure by certain government-owned companies – emerged retrospectively, totalling around 11 billion: an error almost ten times greater than the 1.5 billion margin needed to keep the deficit below the Maastricht threshold.

The government’s decision to replace the end of excise duty rebates with the abolition of road tax serves this objective, because on the one hand it halts expenditure (excise duty) for 2026 and on the other it shifts the new relief measure (road tax) to the 2027 budget. It was a politically astute and financially prudent way of securing this year’s accounts. Backtracking now could be dangerous, because the 170 million in ‘VAT revenue’ is the straw that could break the camel’s back, pushing the deficit from 2.99 per cent to 3 per cent. It would be absurd if Meloni were to jeopardise that target for the sake of a couple of cents’ discount on diesel. Not least because if, in April – in the midst of the election campaign – Istat were to deliver the bad news once again of a deficit above 3 per cent, the opposition would still present the government with the political bill. And it will be a heavier one than today’s.