Italy keeps deficit above EU ceiling as debt continues to rise

The government led by Giorgia Meloni has failed to bring Italy’s budget deficit below the European Union’s 3% threshold in 2025, raising concerns over fiscal stability and the risk of an economic downturn if geopolitical tensions persist.

According to Italy’s national statistics agency, Istat, the deficit narrowed to 3.1% of gross domestic product (GDP), equivalent to around €70 billion, Caliber.Az reports per foreign media.

While this marks an improvement from 3.4% in 2024 and 7.1% in 2023, it remains above the ceiling set by the EU’s Stability and Growth Pact.

Rome had aimed to fall below the 3% limit in order to avoid enhanced scrutiny from the European Commission under its excessive deficit procedure — a mechanism already applied to countries including France, Belgium and Hungary.

Italy’s public debt has meanwhile climbed above €3 trillion, representing 137.1% of GDP, underlining the structural pressures on the country’s finances nearly 15 years after the eurozone debt crisis.

Fiscal revenues rose by 4.8% over the year, while government spending increased by 4.1%. The tax burden reached 43.1% of GDP, up 0.7 percentage points year-on-year. Household purchasing power edged up by a modest 0.9%, reflecting only limited relief for consumers.

However, the economic outlook has deteriorated in recent months. The Italian employers’ federation Confindustria estimates that the ongoing conflict in the Middle East has already shaved 0.2 percentage points off growth. It warns that Italy could slip into recession if the war continues.

Under a scenario in which hostilities had ceased by the end of March, Italy’s GDP growth in 2026 would have been limited to 0.5%, down from a previously expected 0.7%, according to Confindustria projections.

Economy Minister Giancarlo Giorgetti said on April 3 that a broader European debate over debt and deficit thresholds is now “inevitable”, as governments grapple with the lasting fiscal impact of recent crises.

Following the Covid-19 pandemic and the war in Ukraine, the European Union had temporarily allowed member states to exceed deficit limits, offering governments greater flexibility to support their economies.

By Aghakazim Guliyev