The Bank of Italy has warned that Italy’s plan to run budget deficits above 3% of gross domestic product in both 2027 and 2028 could complicate Rome’s attempt to exit the European Union’s excessive-deficit procedure.
Italy expects its deficit to fall within the EU’s 3% threshold in 2026 for the first time since 2019. But the government plans to move back above that level beginning next year as it uses additional fiscal room for defense spending and measures addressing elevated energy costs.
The unusual sequence creates a regulatory complication.
EU flexibility could allow Italy to exceed the headline deficit threshold without automatically triggering a new infringement case. The Bank of Italy nevertheless warned lawmakers that returning above 3% soon after leaving the existing procedure could undermine the argument that Italy’s fiscal consolidation is durable.
Exiting the procedure has been an important objective for Economy Minister Giancarlo Giorgetti because it would mark a formal improvement in Italy’s public-finance position after years of elevated deficits.
The issue matters well beyond Brussels.
Italy carries one of the euro area’s largest sovereign-debt loads, making its budget trajectory closely watched by bond investors. Even where EU rules permit temporary fiscal flexibility, markets can separately demand higher borrowing costs if investors conclude that medium-term debt stabilization is weakening.
The immediate question is therefore not simply whether Italy technically complies with European rules in 2026. It is whether Rome can convince European institutions and bond markets that subsequent increases in borrowing are temporary and compatible with a sustainable debt path.
