Italy presses Brussels to relax budget limits over soaring energy costs

Italian Prime Minister Giorgia Meloni is urging the European Union to relax its fiscal rules to help member states cope with the economic fallout from the Iran war and surging energy prices, POLITICO reports.

In a letter to European Commission President Ursula von der Leyen, Meloni called for “investments and extraordinary measures needed to address the energy crisis” to be excluded from the EU’s Stability and Growth Pact. The framework currently requires member states to keep budget deficits below 3 percent of GDP.

“The crisis in the Middle East and the tensions in the Strait of Hormuz, which add to the effects of the Russian aggression in Ukraine, are already having very heavy and often asymmetrical effects on energy prices, on the costs for families and businesses,” Meloni wrote.

She argued that, similar to how defence spending is exempted from deficit calculations, energy-related expenditures should also be treated with greater flexibility. “We must have the political courage to recognize that today energy security is also a European strategic priority,” she added.

Meloni also warned that Italy would struggle to justify participation in the EU’s SAFE defence financing programme if Brussels does not extend comparable flexibility to energy-related spending. Rome is calling for the bloc’s existing “national safeguard clause,” currently applied to defence investment, to be temporarily expanded to include emergency energy measures.

The appeal comes at a difficult fiscal moment for Italy. Last month, EU statistical authorities confirmed that Rome’s 2025 budget deficit had breached EU fiscal rules. The development follows a political setback for Meloni in a recent justice referendum and is expected to pressure the government to rein in spending ahead of a closely contested election year.

Since the Iran war erupted on February 28 following joint U.S.-Israeli strikes on Iranian targets, Europe has faced rising energy costs and growing concerns over gas supplies, refinery disruptions, and declining jet fuel stocks. Around 20 percent of global oil flows through the Strait of Hormuz.

However, the European Commission has so far resisted calls for major policy changes. Earlier this year, it rejected requests from Austria, Germany, Italy, Portugal, and Spain to impose a windfall tax on energy companies benefiting from wartime price increases in Iran.

On May 17, the Commission signalled continued reluctance to accommodate Meloni’s proposal.

In a statement to Italian media, Commission spokesperson Olof Gill said the EU had already provided governments with “a range of options” to manage the crisis. He also stressed that the bloc was “not including the National Safeguard Clause among these options,” as it aims to remain within “a framework of fiscally responsible constraints.”

By Vafa Guliyeva