Rome trades defense billions for energy room

Giorgia Meloni's government called it a triumph. On June 3, the European Commission announced that EU countries could exempt certain energy spending from their budget rules: up to 0.3% of GDP per year, capped at 0.6% cumulatively through 2028. For Italy, that works out to roughly €14 billion in fiscal room. Economy Minister Giancarlo Giorgetti said he was "satisfied", calling it "unthinkable a few months ago." He then added: "It's a long and complicated path. Let's see how it ends."

Three constraints drain that headline number of most of its meaning.

Borrowed from the Barracks

The energy clause does not create new fiscal space. It sits inside the existing 1.5%-of-GDP National Escape Clause, a mechanism that lets governments temporarily spend beyond their budget limits. The EU first activated it for defence spending after Russia's full-scale invasion of Ukraine. Now the Commission has expanded the definition of eligible spending within that same ceiling, through an administrative communication rather than new legislation.

Every euro Italy spends on energy under this clause is a euro it cannot spend on defence. Rome chose that trade-off. The government had planned to borrow roughly €14.9 billion through SAFE, an EU-wide programme that offers 45-year defence loans at favourable rates, then cut its request to about €5 billion (Il Foglio, Euronews). That surrendered roughly €10 billion in military investment. Defence Minister Guido Crosetto responded bluntly: "Politically, I know my request isn't popular, but I'm doing this for the country."

Declining SAFE doesn't save money. It passes up cheap financing for tanks, satellites, and fighter jets at a time when Europe's security environment is the most strained in decades.

Green Investments, Not Fuel Discounts

The second constraint is what the money can buy. The Commission ruled out fossil fuel subsidies, including the fuel tax cuts Italy has been renewing at considerable cost. Only green investments qualify: renewables, power grids, battery storage, heat pumps, electric vehicles.

Meloni framed the push as relief from high energy bills. The Commission replied: "You cannot solve a supply shock by stimulating demand." Angelo Bonelli of Italy's Greens was more direct: "Brussels excluded the use of European flexibility to finance discounts at the pump."

Italian headlines reading "€14 billion for energy costs" are misleading. The money funds the energy transition, not cheaper petrol.

Who Can Actually Spend It

The clause is open to all 27 EU members on request. Practical access varies sharply. Ten countries sit in the Excessive Deficit Procedure (EDP), the EU's formal process for states whose deficits exceed 3% of GDP. Any new spending they claim must fit within binding deficit-reduction paths.

France is the most telling case. Paris is in EDP, struggling to bring its deficit under control by the end of the decade. The French finance ministry hasn't said a word about the energy clause. That silence reveals more than Rome's celebration: for a country already fighting to cut spending, the clause offers flexibility in name only.

The Commission's broader strategy is visible here: grant a political headline, keep structural discipline intact. High-debt countries, the supposed beneficiaries, have been the most reluctant to activate even the original defence clause. Italy got recognition. Brussels kept the rules.

EU finance ministers, meeting as the Ecofin council, gather on June 11. The European Council follows on June 18-19. Both must still approve. If the ceiling can always be stretched to fit the crisis of the moment, the question is what it's actually there to enforce.