What changed in the budget
Italy's government, led by Premier Giorgia Meloni, plans to cut back on previously envisioned defense spending as part of a last-minute budget adjustment aimed at shrinking the deficit. The shift lowers the amount that must be financed for the military so that defense-related borrowing will account for 0.6% of output over the period in question, down from 0.9% in earlier plans.
An extra €28 billion ($32 billion) of borrowing - less than initially planned - is slated to receive ministerial approval. Of that total, €14 billion would go toward energy initiatives spanning the next two years, and a further €14 billion would be allocated to the armed forces. Her cabinet is slated to give the green light to the figures late Friday. A Finance Ministry representative declined to discuss the projections.
Why it matters right now
Officials familiar with the deliberations say tighter spending means less need to tap markets, which in turn helps pull this year's shortfall under the European Union's 3% of GDP ceiling. They also point to a growth mix that helps the budget arithmetic: nearly 1% expansion this year and about 0.6% in 2027.
The politics and the path ahead
This is the last budget before elections next year, and Meloni now faces a new ultra-nationalist contender, former general Roberto Vannacci, whose party has risen to roughly 8% in recent polls. The forecasts paint a relatively solid picture that could bolster her standing with voters after a long stretch of underwhelming growth.
Under Meloni, Italy has steadily pared its deficit, earning kudos from ratings firms. That contrasts with France, where the gap exceeds 5% of output. The government's 2026 outlook would meaningfully top the coalition's prior expectations, indicating that the economy has weathered the energy shock and trade strains with unexpected strength. That momentum is helping narrow the deficit and could open the door to leaving the EU's special oversight for high-debt countries, something Italy has not yet managed.
When policy choices shift priorities, staying consistent pays off, so download the free Always Be Buying E-Book to learn more
What it means for households and your money
There are still real risks. Bond yields have jumped, Italy's towering debt pile is set to stand out as the biggest in the region as Greece repairs its finances, growth is seen slowing next year, and the Middle East crisis continues. Inflation accelerated more than anticipated, reaching 4.1% in September - the quickest pace since 2023 - and squeezing consumers.
With those pressures in mind, Meloni and Finance Minister Giancarlo Giorgetti intend to channel any growth dividend toward easing household strain. One headline measure: delivering on a campaign pledge by broadening an income bracket so that earners between €50,001 and €60,000 pay lower taxes. For everyday budgets, that is the line item to watch as the government tries to keep markets calm and wallets a bit less pinched.
Even amid changing government plans, a steady approach can build wealth, so claim your free Always Be Buying E-Book today
