Italy’s fiscal debate over defence spending, EU debt flexibility and public debt

Former ECB board member Lorenzo Bini Smaghi argued that financing EU defence programmes through common debt is rational and could boost European strategic autonomy, but warned that higher military spending might crowd out resources for the energy transition and social cohesion.

Economist Carlo Cottarelli cautioned that Italy does not need to use the new EU flexibility on public‑debt to raise additional borrowing now. He said any extra deficit should be limited to preventing a recession and that current macro‑data do not justify a fiscal expansion.

Economy Minister Giancarlo Giorgetti reiterated that any increase in defence outlays must be approved by parliament and will not come at the expense of education or health spending. He stressed that the government is complying with the EU stability pact and that the defence‑funding “Safe” programme could be financed through a European borrowing clause without cutting other social programmes.

Eurostat data released in July 2026 show Italy’s public‑debt ratio rising 1.8 % in the first quarter of 2026 to 138.9 % of GDP, keeping the country near the top of the euro‑area debt rankings.