Salvini or the national interest? Why giving up on Safe would be a political mistake for Meloni

From the slip of the tongue by Foreign Minister Antonio Tajani, who unexpectedly announced the use of 14.9 billion from the SAFE fund only to backtrack later, stating that everything is still to be finalised, it is clear that the European defence fund, Security Action for Europe, is a politically sensitive issue. This runs parallel to, but does not entirely overlap with, the increase in military spending. The issue of increasing the budget allocation will be addressed on 5 August, with a statement to the Chamber of Deputies by the Minister for the Economy, Giancarlo Giorgetti, on the use of the National Exception Clause (NEC), which, precisely, allows 1.5 percentage points of GDP earmarked for defence and energy to be excluded from the Stability Pact. The broad agreement within the government is to utilise the full three-year scope permitted by the NEC by increasing military spending by 0.9 per cent of GDP (+0.3 per cent in 2027 and +0.6 per cent in 2028) and allocating 0.6 per cent to tackle the energy crisis (up to a maximum of 0.3 per cent per year).

How to finance the additional security expenditure – whether through national or European debt (the ‘Safe’ facility, in fact) – is a related but separate issue. There are differing pressures within the government. The aim of the Defence Minister, Guido Crosetto, is to bring the country’s defence capabilities up to standard and to move closer to the targets agreed within NATO, whilst seeking to make up for the shortfall in funding originally planned for 2026. Consequently, Crosetto is not getting too involved in the details of how this expenditure will be funded, leaving the decision on financial viability to Giorgetti: “It is an entirely technical decision that the minister will make.”

Giorgetti, for his part, is very mindful of the budget balance and would prefer not to use all the available flexibility, as this would in any case lead to increased debt. The logical consequence would be to use the SAFE, as it is less expensive than BTPs. Meanwhile, Deputy Prime Minister Matteo Salvini and his right-hand man Borghi are opposed to both an increase in military spending and the use of the SAFE to finance it. The political compromise, in the end, could be a more modest increase in military spending but without resorting (or resorting only partially) to the SAFE. Giorgia Meloni might be tempted by this compromise solution, to defuse the pre-election tensions weighing on the government, but she would be making a serious political mistake. For three reasons of national interest.

The first reason is financial. As Giorgetti himself pointed out in Parliament on 22 July, the SAFE has a “favourable interest rate”. Moreover, the European Commission uses a “unified approach” to issue debt, and therefore the cost of financing the SAFE is the same as that of the Next Generation EU programme, which Italy already considers more cost-effective than national debt for financing the NRRP. Not using the SAFE to appease the Lega’s discontent amounts to throwing money away on interest payments.

The second reason concerns relations with Europe. Meloni has managed to secure several concessions from the Commission – one need only think of the energy exemption in the NEC – and to forgo the 14.9 billion (10 per cent of the total) already earmarked under the SAFE programme would be a snub to Brussels, which risks not having time to reallocate the unclaimed funds to other countries.

But there is a third reason, which is of strategic importance for the country as well as for the Prime Minister. For some time now, Italy has been calling for the issuance of Eurobonds for new joint projects and for the Next Generation EU programme to be renewed; for the Nordic countries, however, this has been an exceptional chapter that should be brought to a close. Just a few weeks ago, the Ministry of Economy and Finance (MEF) backed Spain’s proposal, put forward by Finance Minister Carlos Cuerpo, to create a new European safe asset by issuing €850 billion of joint debt per year to support investment. For Italy to abandon the SAFE would only serve to weaken its own position and provide ammunition to those on the opposing side, such as Germany or the Netherlands: if member states prefer national debt and do not make use of existing European debt – such as the SAFE, which, incidentally, finances a European common good such as defence – it means there is no need to issue further Eurobonds. Do the internal dynamics of the ruling coalition and the parties’ electoral considerations really matter more to Giorgia Meloni than the national interest?