First revise, then spend: Rome stakes its 2027 budget on a single accounting revision

On September 6, at the closing day of the Teha Forum held at the Este Villa in Cernobbio on Lake Como, Giancarlo Giorgetti, Italy’s Minister of Economy and Finance, presented figures more favorable than those in the government’s own budget documents. While the government had assumed growth of 0.6% when drafting the budget, actual growth has already reached 0.8%; at the current pace, full-year growth could approach 1%. The independent Parliamentary Budget Office (Ufficio parlamentare di bilancio, UPB) forecasts growth of 0.9% for 2026. In Rome, these decimal points matter not for growth itself—but for an accounting revision scheduled just two weeks later. September 22 The National Institute of Statistics (Istituto nazionale di statistica, ISTAT) will release revised national accounts data for 2025 on September 22. Only one figure matters that day: whether the general government deficit for 2025 falls above or below the 3% threshold. According to Eurostat’s current records, Italy’s 2025 deficit stands at 3.1% of GDP—just one-tenth of a percentage point above the threshold. That narrow gap means the excessive deficit procedure (EDP) launched by the EU against Italy in 2024 cannot be concluded one year early—in 2026—but must instead run its full course until 2027. If the revision pushes the 2025 deficit below 3%, the fiscal space available for the 2027 budget will change accordingly. The government plans a budget package valued between €30 billion and €40 billion, plus an additional €14 billion in flexibility allowances under the EU framework. Narrowing by four percentage points over two years Placing Italy back on the same chart for comparison, the scale of this fiscal consolidation is unmistakable. Eurostat’s data reads as follows: Italy’s deficit stood at 8.1% in 2022, 7.1% in 2023, 3.4% in 2024, and 3.1% in 2025—a narrowing of four percentage points within two years. Over the same period, France fell from 5.4% to 5.1%, Spain from 3.3% to 2.4%, and Germany rose slightly from 2.5% to 2.7%. Among the eurozone’s four largest economies, only Italy achieved adjustment of this magnitude. The environment in which this was accomplished was far from accommodating. Italy’s interest expenditure in 2025 amounts to 3.9% of GDP—the heaviest burden among the four countries (France’s is 2.2%). Achieving a four-percentage-point reduction in the deficit amid such high interest costs reflects primary surpluses—not luck. Debt did not decline accordingly The strongest counterargument also appears on this same chart: while the deficit dropped by four percentage points, the debt-to-GDP ratio rose—133.9% in 2023, 134.7% in 2024, and 137.1% in 2025. This divergence has a technical explanation. The Superbonus building tax credit was recorded on an accrual basis in the deficits for 2020–2023, but cash outflows occurred gradually over subsequent years. As a result, the deficit reflected the cost upfront, while debt accumulation lagged.

EU institutional diagnosis and the 'triple squeeze' transformation—A comprehensive, multi-dimensional analysis based on the Eight-Act Framework (2026)

Core assessment: The EU stands atop a 'triple squeeze'—simultaneously narrowing competitiveness, fiscal, and political margins—placing the overall institutional system in the 'pre-transformation' phase (Λ ≈ 0.52) of the Eight-Act Framework. Yet unlike the 'fully locked-in' rigid path, geopolitical shocks are opening sectoral reform windows within the EU (defense, enlargement, digital euro, energy autonomy), resulting in a distinctive pattern of 'structural lock-in coexisting with sectoral transformation'. Five core findings: 1. Growth engines approaching physical limits: Eurozone labor productivity growth per hour averaged just 0.3% from 2021–2025 (versus 1.2% in the U.S.). Since Q3 2023, roughly half of growth has relied on employment expansion (+7.8 million jobs); migrant labor force additions totaled ~4.2 million from 2021–2025. The working-age population in the eurozone will decline from ~260 million in 2025 to ~236 million by 2050—both buffers ('extending working life' and 'immigration') are nearing exhaustion, leaving productivity as the sole remaining lever. 2. Monetary policy pivoting to 'inflation defense': On June 11, 2026, the European Central Bank raised its deposit rate by 25 bps to 2.25%—its first hike in three years—triggered by Middle East hostilities pushing up energy prices (eurozone May HICP: 3.2%; energy component: +10.9%). The ECB downgraded its 2026 growth forecast to 0.8% and raised its inflation forecast to 3.0%—the 'weak growth + reflation' combination severely constrains monetary policy maneuverability. 3. Fiscal rules 'relaxing' alongside rising debt: The reformed Stability and Growth Pact fully enters into force in 2026 (with customized 4–7-year adjustment paths and exemptions for defense, green, and digital spending). The eurozone’s deficit ratio rises from 2.9% in 2025 to an expected 3.4% in 2026; government debt ratio climbs to 88.9%. France (deficit: 5.1%, debt: 117.6%) and Italy (debt: 138.9%) remain trapped in excessive deficit procedures, while Germany exploits the defense exemption to loosen constraints and expand (€500 billion infrastructure fund)—endogenous distributive tensions continue to accumulate. 4. Political landscape shifting rightward; mainstream coalition faces first-ever majority loss: In the 2024 European Parliament elections, the three major right-wing groups collectively secured ~187 seats (26%). A European election model released in August 2026 predicts that the post-WWII mainstream coalition (EPP + Renew Europe + S&D) will fall short of a majority in the 2029 elections for the first time. Meanwhile, Germany’s AfD, France’s RN, and the UK’s Reform Party simultaneously top national polls in their respective countries—an unprecedented historical first. Though the institutional 'menu of choices' remains unchanged, the outcomes of those choices are actively reshaping the institutions themselves. 5. Sectoral transformation windows have already opened: Overall implementation of the Draghi reforms (383 recommendations) stands at only 15.7%, yet defense-related implementation reaches 78.6%. Enlargement negotiations with Ukraine and Moldova commence in two clusters during June–July 2026; Montenegro has closed 18 of 33 negotiation chapters. Digital euro legislation is expected to be finalized by end-2026; the Industrial Accelerator Act aims for adoption before year-end—The EU is advancing localized breakthroughs beyond consensus-based decision-making, anchored on 'security and sovereignty' and coordinated via 'coalitions of the willing'.

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Italian Prime Minister Giorgia Meloni requests EU budget flexibility to mitigate inflation driven by energy costs, proposing €14 billion in spending to lower firm energy expenses via a national escape clause.

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Italy to seek more leeway on EU budget rules to factor in inflation impact

Italy to seek more leeway on EU budget rules to factor in inflation impact

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