With Italy’s deficit/GDP confirmed at 3.1% for 2025, just above the European threshold of 3%, the hypothesis of an exit from the excessive deficit procedure fades away. Here is a sheet with the relevant elements:
The 3% threshold
The excessive deficit procedure is the mechanism provided for by the EU Treaties to correct imbalances in public finances. Two reference values are set: the public deficit ratio must not exceed 3% of GDP and the public debt must not exceed 60% of GDP. The overrun does not automatically lead to the start of the procedure. The Commission prepares a report on the overrun, assesses whether it is exceptional or temporary and also takes into account certain ‘relevant circumstances’. It is therefore the Council, on a proposal from the Commission, that formally opens the procedure.
The path to correct the deficit
The 2024 reform of the Stability Pact confirmed the ‘corrective arm with the measures to be undertaken for those who fail to do so. When there is a procedure for violation of the deficit criterion, the Council assigns a corrective path for net spending (also after a negotiation between the country and the Commission), to bring it back below 3% with a path consistent with a minimum annual structural adjustment of 0.5% of GDP. Without effective measures, fines of up to 0.05% of GDP are possible for Eurozone states.
The asymmetry with the national escape clause
The national safeguard clause with exceptions to the Pact, or ‘Nec’, introduces flexibility on the spending path but does not cancel the 3% limit. It is currently activated by 16 countries with exemptions on defense spending up to 1.5% of GDP in four years and it is expected that it may also be extended to energy investments. Italy has sent the request to activate it. If a country is not already in the procedure, the Commission and Council can decide not to open the process when the 3% excess is attributable to the expenses authorized by the Nec. The situation is different for a country already in the procedure (a different regulation applies): the Nec can allow you to deviate from the spending path without there being a failure to comply with the agreed plan, but it does not change the requirement to close the procedure. To do this, the deficit must still go below 3% in a credible and long-lasting way, even if the overshoot depends on investments in defense and energy.