ROME — The Italian government is giving up a chance to grab an extra €12 billion ($14 billion) in defense spending as it shifts its focus to keeping energy bills down ahead of national elections next year.
Prime Minister Giorgia Meloni has been toying with the idea of triggering a European Union scheme to exempt a quantity of defense spending from calculations of annual deficit spending to allow extra arms purchases without breaking EU deficit rules.
The so-called National Escape Clause (NEC) would have boosted Italian defense spending by about €12 billion over three years if used, sources have told Defense News — a handy sum as Italy strives to push its arms budget to 5% of GDP from the current 2%.
But when asked about the NEC this week, Italian prime minister Giorgia Meloni said, “Today we have other priorities. I have the priority of energy costs and the priority of responding to the needs of citizens.”
The decision followed years in which Meloni’s government urged the EU to set up a scheme like the NEC, arguing it was the only way to boost defense spending.
“I think there were different opinions about the NEC within the Italian government, with the economy minister Giancarlo Giorgetti against it,” said Alessandro Marrone, who heads the defense program at Rome think tank IAI.
“The extra spending would push up Italy’s deficit, even if the EU allowed it, at a time when Italy’s priority is fiscal credibility, energy prices and inflation,” he added.
The EU normally requires member states to keep their budget deficit below 3% of GDP or face infraction procedures. But if they use the NEC scheme they can now add on extra defense spending worth 1.5% of GDP, every year, for four years starting from 2025 without punishment.
So far 17 member states have participated in the scheme including Germany.
The NEC looked tailor made for Italy, which spent spent €29.18 billion on defense in 2024, equaling 1.54% of GDP and only made it to 2% in 2025 by inserting existing expenditures to its defense budget calculation.
Rome is now trying to reach five percent as per NATO targets. Last year it applied for €14.9 billion in so-called SAFE loans made available by the EU for defense spending.
Marrone said that using just the SAFE loan funds would however only get Italy to defense spending worth 2.5 percent of GDP.
In October, Rome said it would look into the NEC scheme if the SAFE loans were not enough to meet spending targets.
But Meloni’s government also said it did not want to use the NEC option while its annual deficit remained over 3%. This week, new figures showed the deficit was 3.1%, prompting Meloni to state Italy would not be using the NEC scheme.
“This was a policy choice by Italy - there is nothing to stop a member state using the NEC while they are over 3%. Others have,” said an EU official who spoke on condition of anonymity.
What may have persuaded Meloni to ignore the NEC option is opposition in Italy to hiked defense spending as voters prioritize the sagging economy and the threat of increased energy prices following the U.S.-Israeli attacks on Iran.
Italy’s economic outlook is set to become a political hot potato this year as Meloni seeks reelection in 2027.
Following news that Italy’s deficit spending was stuck at 3.1%, opposition leader Elly Schlein said Italy’s commitment to push defense spending to 5% was “mistaken, unobtainable and will irreparably damage our welfare.”
Tom Kington is the Italy correspondent for Defense News.
