Italy Challenges EU Fiscal Framework Amid Defense Spending Pressures

Italy has appealed to the European Union for guaranteed bond issuance to meet NATO's defense spending target, set at 2% of GDP by 2028. Italian officials highlight a clash between this requirement and the EU's fiscal rules, with economy and defense ministers advocating for special financial treatment to navigate high public debt and spending obligations.

Italy has appealed to the European Union for guaranteed bond issuances to support defense spending, emphasizing a conflict between NATO's 2% GDP target for defense and the EU's fiscal guidelines. NATO's pressure came following the 2022 Russian invasion of Ukraine, prompting European members to enhance military capabilities.

With defense spending set at 1.61% by 2027, Italy faces a challenge in meeting NATO's expectations. Economy Minister Giancarlo Giorgetti and Defense Minister Guido Crosetto have expressed concerns, citing the need for special financial mechanisms to prevent defense expenditures from impacting public debt, projected to reach 137.8% of GDP by 2026.

Rome seeks a European guarantee to limit the cost of increased borrowing related to defense, thus safeguarding social spending. Despite NATO's anticipation of 23 members reaching the 2% target, Italy remains behind, as echoed by discussions in the Italian Senate with calls for equitable financial solutions.

(With inputs from agencies.)