Rome has missed its deficit reduction target for the second year running, with the EU’s statistical office confirming a shortfall that government ministers now blame squarely on the economic fallout from the escalating conflict in the Middle East.
Deficit target missed as Eurostat confirms 3.1% figure
The war in the Middle East is having a significant impact on Italy’s public finances. Eurostat has confirmed that Italy failed to meet its goal of bringing its budget deficit below 3% of GDP – the recorded figure stands at 3.1% – and this is now affecting the government’s public finance document for 2026, approved by the Council of Ministers.
In effect, Italy is not complying with the parameters of the Stability and Growth Pact and has not been exempted from the excessive deficit procedure. This will limit Rome’s room for fiscal manoeuvre and reduce the resources available for the next budget law, the last of the current parliamentary term.
Today the government approved the public finance document (Documento di Finanza Pubblica, or DFP). “We have revised our GDP forecasts for 2026-2027,” explained Economy Minister Giancarlo Giorgetti. “Growth will fall from 0.7% to 0.6% this year, from 0.8% to 0.6% in 2027, and from 0.9% to 0.8% in 2028.”
Minister turns to football coach’s wisdom on penalty rules
The government’s failure to meet the Stability Pact targets – which would have allowed Italy to exit the EU’s excessive deficit procedure – does not appear to be keeping ministers awake at night.
“I was very interested up until 28 February 2026,” Giorgetti said, referring to the date of the US and Israeli attack on Iran, “but after that date, my interest has waned somewhat.” He reached for a historical quote from the late football coach Vujadin Boškov to explain the situation: “A penalty is when the referee blows the whistle. The referee has given a penalty; you may agree or disagree, but those are the rules of the game.”
The main concern at the Treasury on Via XX Settembre is the energy shock caused by the conflict. Giorgetti stressed that he had not asked the EU for exemptions from the Stability Pact.
“I asked for readiness and flexibility in responding to situations – not permissiveness, but flexibility,” he clarified. “Because rigidity in a world that has completely changed is unacceptable.” In this vein, he argued that equal attention should be paid both to exemptions for defence spending and to exemptions for addressing rising gas, electricity and fuel prices. The current situation is so worrying, Giorgetti said, that “it must be examined very soon with political decisions taken”.
Meloni blames “disastrous” Superbonus scheme
Prime Minister Giorgia Meloni, meanwhile, criticised the “Superbonus” scheme. “It is outrageous that the deficit would have remained below 3% if the treasury had not been burdened even in 2025 by billions of euros spent on the Superbonus,” she wrote on social media. “This disastrous measure of the centre-left Conte II government is now preventing Italy from exiting the excessive deficit procedure, denying the government the ability to allocate funds to healthcare, education and support for the poor.”
However, the Prime Minister also stressed: “On deficit reduction, we have achieved a result many thought impossible. In 2022, when this government took office, the deficit-to-GDP ratio stood at 8.1%; today we have reduced it to 3.1%. That figure is not only five percentage points lower than when we came to power, but also better than the government’s own forecasts, which had put 2025 at 3.3%. We remain disappointed,” she concluded, “that we narrowly missed the 3% threshold, which would have allowed us to exit the EU’s excessive deficit procedure a year early – and that would have meant greater fiscal room for the state.”
Conte: “They have failed. Now we must rise again”
Meanwhile, former prime minister Giuseppe Conte wrote on his X profile: “THEY HAVE FAILED. NOW WE MUST RISE AGAIN. The news from Italy, just in, fills me with deep concern and compels me to seek solutions. Giorgia Meloni’s government course – based on blanket cuts and austerity – has failed. It has not even met the 3% deficit target, the very target it staked everything on through four “tears and blood” budget manoeuvres. We are now locked tight in the cage of constraints imposed by the Stability Pact – the same pact this government signed in Brussels, thereby condemning Italy to cuts in healthcare, education, business support and energy. Meloni has shown she is not the captain this country needs at this historical juncture: she has failed in both foreign and economic policy. This was the only government that deemed “unworthy of attention” the €209bn in investment funds sitting right on its table – funds we won back in Europe. Instead of betting on growth and using those investments to reduce the deficit-to-GDP ratio, it crushed the country’s economic forces, raised taxes, drove the tax burden to record levels and stood idly by as industrial production collapsed for three years. While families and businesses struggle ever more, the government has increased military spending by €12bn a year and allowed banks and energy giants to rake in colossal profits. Italians weep, while arms manufacturers – especially foreign ones – and banks celebrate.”
