ROME — Italy’s national statistics agency, ISTAT, was overzealous. The agency confirmed Tuesday that the country’s budget deficit stood at 3.1% of GDP in 2025, down from 3.4% in 2024. Enough to confirm that Italy’s public finances are improving, but not enough to bring the deficit below the EU’s 3% threshold.
The result is that Rome will not secure an early exit from the Excessive Deficit Procedure (EDP), just as the government is preparing a budget law that will carry political weight ahead of next year’s elections.
Why it matters: The government had hoped to enter the final phase of its term with greater fiscal room. Remaining under the EU procedure instead means operating under tighter constraints at precisely the moment when the governing parties have an interest in showing voters the results of their time in office.
- Italy will have to continue reducing its structural deficit by 0.5 percentage points a year while complying with limits on net expenditure growth.
- That narrows the room available to fund new measures in the next budget.
- It also complicates the government’s assessment of whether to activate an EU clause that would allow up to 1.5% of GDP — around €30 billion — in defense and energy spending to be excluded from deficit calculations over the next two years.
The number that changes the picture. The mathematical difference is tiny; politically, much less so.
- In April, Istat had calculated Italy’s 2025 deficit at 3.07% of GDP, rounded to 3.1%. To record a figure considered below 3%, it would have needed to fall to at least 2.94%.
- The government had hoped revisions to the public accounts could close that gap this year, although official documents had consistently projected the deficit falling below 3% in 2026.
- Instead, Istat’s revision raised estimated revenues by €1.991 billion and expenditure by €2.346 billion, resulting in a €355 million deterioration in the estimated deficit.
Not enough! The government had spent the past years tightening Italy’s public finances, bringing the deficit down sharply from the 7.4% of GDP recorded in 2023 to 3.1% in 2025. But that fiscal consolidation ultimately fell short by a matter of hundredths of a percentage point.
- That is what makes the outcome particularly consequential for Meloni. Istat’s strict application of the statistical threshold leaves virtually no room for political interpretation: after years of fiscal restraint, the government has missed the opening it was hoping for by a statistical margin worth less than €2 billion — small enough to look marginal on paper, but large enough to keep Italy under European fiscal constraints.
The minister’s reaction: Economy and Finance Minister Giancarlo Giorgetti’s unhappiness was plain to see. “We take note, not without regret, of Istat’s final figures for the 2025 deficit-to-GDP ratio,” he said.
- Italy, he added, “will not exit the Excessive Deficit Procedure early this year, as we had hoped,” pointing instead to 2027 as the year when the country could leave the procedure.
The big picture: Behind an apparently technical accounting issue lies a broader political problem.
- Italy entered the EU procedure in 2024 after recording a deficit equivalent to 7.4% of GDP in 2023. The latest figures show that the fiscal adjustment is moving forward. Growth was also revised slightly higher, with real GDP expanding by 0.6% in 2025, 0.1 percentage points above the previous estimate.
- But the government did not get the number it had hoped could open a new phase. And the political calendar magnifies the impact.
- The next budget comes at the end of the government’s political cycle and ahead of elections expected next year. Greater fiscal freedom would have given the governing coalition more room to craft a budget capable of accompanying it into that electoral deadline. Remaining under EU fiscal oversight instead reduces the space available.
Between the lines: The tension surfaced immediately in the governing coalition’s reaction.
- Deputy Prime Minister Matteo Salvini focused his criticism precisely on the tiny margin that prevented Italy from leaving the procedure. “It is surreal that in 2026 Europe’s second-largest industrial power should depend on zero-point-something mechanisms and logic to know whether it can or cannot invest in its future,” he said.
- That is the political crux: a statistical decision of seemingly marginal scale is producing a much larger fiscal — and therefore political — effect.
There is nothing in the available information to suggest that ISTAT acted with political intent. But the effect of the revision is unequivocally unfavorable to the government: it prevents the early exit from the EDP that the executive had hoped for and keeps European fiscal constraints in place at the most politically sensitive point of the parliamentary term.
- The opposition immediately seized on the result, pointing to rising taxes and debt as evidence of what it described as the failure of the government’s economic strategy and calling the 3.1% figure a “setback” for the Meloni government, including with an eye to the coming election.
What we’re watching: The real consequences of that 3.1% figure will now emerge as the government drafts its next budget.
- Giorgetti fears that Italy could remain trapped in the procedure for years and continues to have doubts over the use of the EU clause covering higher defense and energy spending. The issue will also have to be discussed within the governing coalition.
- For Meloni, then, the problem is not simply that Italy missed a European threshold by a few hundredths of a percentage point. It is that it happened at a moment when every billion euros available in the next budget can also carry political value.
The bottom line: ISTAT upgraded Italy’s growth figures, and the deficit continues to fall. But the number that mattered politically remained on the wrong side of the EU threshold. That 3.1% will now follow Meloni’s government as it prepares its final budget before the election.
