Italy Scales Back Planned Defense Increase

Italy's cabinet on Friday approved the Public Finance Planning Document. The government scaled back its planned 2028 defense spending increase to 0.3% of GDP from 0.6%. The 2027 increase remains at 0.3% of GDP. Defense Minister Guido Crosetto said the revision means about 8 billion euros less defense spending than previously planned. He attributed the decision to the current economic situation, inflation, and bond market turbulence. Prime Minister Giorgia Meloni signaled this year's growth estimate will rise to close to 1%, up from April's 0.6% projection. The 2026 deficit is expected at about 2.9% of GDP, below the EU's 3% ceiling for the first time since 2019. Public debt is targeted to peak in 2026 at almost 139% of GDP, overtaking Greece as the eurozone's most indebted nation. In August the government wanted an extra deficit of 1.5% of GDP, about 36 billion euros through 2028, via the national escape clause. Extra defense spending is reduced to 0.6% of GDP from 0.9%. Energy keeps the full 0.6%. The 2027 deficit target is 2.8% and is expected to rise with the escape clause.