Italy's defence budget jumps, transparency concerns remain

Italy has raised its defence spending by €14 billion this year, bringing the total to €45.3 billion. However, economists have raised concerns over the lack of transparency in how the government achieved this increase, particularly in light of reclassifying various expenditures as defense-related.

Carlo Cottarelli, a leading economist and former Italian senator, criticised the government for not providing a clear explanation of how it met its target of 2% of GDP for defence spending in 2025, up from around 1.5% in 2024.

"Should we consider ourselves more secure than last year? We don’t know," Cottarelli, who teaches at Milan’s Catholic University of the Sacred Heart and has worked with the International Monetary Fund, told Defense News. 

The Italian government first pledged to reach 2% of GDP in defence spending in April, fulfilling a commitment made to NATO in 2014. The move was timed ahead of the NATO summit in June, where members agreed to further raise defence spending targets to 3.5% of GDP by 2035, alongside an additional 1.5% for defence infrastructure.

Details of Italy's 2025 defence budget were first released in October, revealing a 7.2% increase in defence spending to €31.3 billion, along with plans to reclassify certain expenditures as defence spending to meet the 2% target.

These reclassified expenses include pension payments and other budget items given a “more military focus,” along with “military cooperation projects.” By incorporating these reclassifications, Italy was able to officially hit the €45.3 billion mark, meeting the 2% of GDP target.

In his recent report, Cottarelli highlighted a statement from Italian Defence Minister Guido Crosetto, in which the minister explained that reaching the 2% target involved counting expenditures by Italy’s tax police and coast guard, as well as outlays related to space and cyber defence. "Just as other countries do," Crosetto added.

However, Cottarelli questioned the lack of clarity surrounding these reclassified expenditures. "It’s not clear from the words of the minister or from official documents what this reclassification consists of. Is it existing spending that now has a ‘more military’ connotation than in the past, or has it been understood that some spending is more military than previously thought? Additionally, it is not known which spending is involved," Cottarelli wrote in his report. He also noted that no new information had been provided since the report’s release.

Despite the concerns raised by Cottarelli, a NATO official told Defense News that the alliance was satisfied with Italy's approach.

"The defence expenditures declared by Italy are consistent with the NATO definition of defence expenditure and the approach is also applied by other allies," the official said.

When asked to provide a breakdown of the reclassified spending, the NATO official referred the matter to Italian authorities.

By Sabina Mammadli