Report published September 24, 2026
Italy: Fiscal Discipline Meets New Flexibility – UniCredit Research
UniCredit · September 24, 2026
Italy starts its budget season with solid economic growth supporting improved deficit projections of 2.7–2.8% of GDP for 2026. However, potential use of the National Escape Clause for energy and defence spending risks pushing deficits towards 3% in 2027–2028 and delaying an exit from the EU's Excessive Deficit Procedure.
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Finvaulta summarizes UniCredit's analysis. Attribute opinions, forecasts, time-sensitive values, and chronology to the issuer and report date; do not treat this page as an independent verification or a current market-data source.
Key Takeaways
- 1.Italy enters the budget season supported by stronger growth, which could lower the 2026 deficit to 2.7–2.8% of GDP, though the 2025 deficit of 3.1% delays exiting the EU's Excessive Deficit Procedure.
- 2.Activating the National Escape Clause could unlock fiscal flexibility of ~0.3% of GDP in 2027-2028 for energy and up to 0.9% for defence, shifting the 2027 fiscal stance from tightening to broadly neutral.
- 3.Higher defence spending presents a key fiscal risk for 2028, potentially pushing the deficit back towards or above 3% of GDP and postponing Italy's EDP exit.
Table of Contents
- The Context
- The Data
- Our View
- Other Things to Note
- Today's Data Releases
Report data
MOVING TOWARDS A NEUTRAL FISCAL STANCE FOR 2027, WHILE REMAINING BELOW 3%
| Metric | Estimate | Context |
|---|---|---|
| Italy Budget Deficit to GDP | 3.1% | Narrowed in 2025 but remains slightly above the 3% EDP threshold. |
| Italy Public Debt to GDP | 136.7% | Public debt trajectory improved following upward revision to real GDP growth path. |
| Italy Target Budget Deficit to GDP | 2.9% | Official target alongside required 0.5pp EDP adjustment, could decline to 2.7-2.8% on stronger growth. |
| Italy Target Budget Deficit to GDP | 2.8% | Baseline deficit target for 2027. |
| Italy Potential Defence Spending Flexibility via NEC | 0.9 % of GDP | Additional spending space under NATO targets via the National Escape Clause. |
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