The verdict of theIstat It's here: in 2025 thenet borrowing of public administrations has been confirmed at 3,1% of GDP, an improvement from 3,4% in 2024, but still above the European threshold of 3%. For Italy, the early exit from the EU thus fades away. EU excessive deficit procedure, while the government will have to deal with tighter margins in building the next Budget law, the last of the legislature.
Giorgetti: "We acknowledge this, but not without regret."
"We note, not without regret, the final data expressed by ISTAT on the deficit-GDP ratio for 2025. Unfortunately, Italy will not exit the excessive deficit infringement procedure early this year, as we had hoped, but, in line with the data already expressed in the DFP, this could happen in 2027," commented the Minister of Economy and Finance. Giancarlo Giorgetti.
The government was aiming to complete the exit process from the procedure as early as 2026. Istat's result, however, postpones the finish line in 2027, which remains possible but will depend on the evolution of public finances.
The 3% threshold and those two billion that make the difference
The gap to the European threshold is minimal, but far from insignificant. In April, ISTAT estimated net debt at approximately 3,073% of GDP. With the revision, the figure rises slightly to 3,079%; rounded, it remains at 3,1%. To arrive at exactly 3%. a deficit of approximately 1,8 billion euros less would have been enoughTo obtain a value clearly below the threshold even after rounding, the reference would have been 2,94%, which would have required an improvement of approximately 3,1 billion. The ISTAT revision has in fact nominal GDP increased by almost 7 billion, but at the same time worsened the deficit by 355 million.
In recent months, the government had left open the possibility that statistical revisions could bring the ratio below 3%. The final result, however, was not sufficient. On the eve of the verdict, Giorgetti himself had summed up his expectations thus: "not confident, but hopeful." A hope that did not translate into the expected result, just as the construction of the maneuver.
What changes for Italy with the EU procedure
Remaining in the excessive deficit procedure, initiated in 2024 after the 2023 deficit reached 7,4% of GDP, means Italy will have to face a more stringent recovery process. Among the obligations are: reduction of the structural deficit by 0,5 percentage points of GDP per year, along with compliance with constraints on net spending growth. Italy would have relatively larger margins in 2027 and 2028, but the deficit reduction path would limit its use.
The issue becomes particularly relevant also for the possibility of resorting to the European flexibility clause which allows to exclude some from the deficit calculation defense and energy spending, up to 1,5 percentage points of GDP, equivalent to approximately €30 billion over the next two years. Remaining in the process longer could therefore make it more difficult to fully utilize these margins.
Deficit/GDP at 3,1%, what changes for the Budget?
If Italy had managed to bring the deficit below 3%, the government could have asked Parliament for a budget variance of 10 billion of euros for 2027 and 20 billion for 2028, earmarked for energy and defense. Resources that would be added to those of the next Budget Law, for a budget that could have counted on an overall margin of around 25 billion.
With the threshold not being reached, the picture is less favorable: remaining in the procedure means having less room and having to rely more on coverage, spending cuts, and new revenue. Exiting the procedure in 2027 remains possible, but in the meantime, the The government is preparing the final budget of the legislature. with narrower marginsAnd just as the calendar draws closer to the general election, expectations are high and resources are low.
"Italy makes its own decisions as long as it retains the trust of its lenders. If it loses that trust, its creditors will dictate its priorities," Giorgetti emphasized. The challenge now will be to find a balance between meeting European commitments and the resources needed to finance the government's priorities.
