Rome cuts defence for energy funds

Giorgia Meloni's government sold it as a win. On June 3, the European Commission announced that EU governments may exclude some energy spending from the deficit calculations that normally bind their budgets: up to 0.3% of GDP a year, with a cumulative cap of 0.6% until 2028. For Italy, that means about €14 billion in budgetary room. Economy Minister Giancarlo Giorgetti said he was "satisfied", describing the move as "unthinkable a few months ago." Then came the caution: "It's a long and complicated path. Let's see how it ends."

For smaller eurozone countries such as Malta, the lesson is familiar. Brussels can give a government political breathing space, but the fine print decides whether that space can actually be used. In Italy's case, three limits strip much of the shine from the headline figure.

Borrowed from the Barracks

The energy clause does not open a new spending lane. It is being placed inside the existing 1.5%-of-GDP National Escape Clause, the EU mechanism that lets governments temporarily go beyond their normal budget limits. The EU first activated it for defence spending after Russia's full-scale invasion of Ukraine. The Commission has now widened what counts as eligible spending within the same ceiling, using an administrative communication rather than new law.

That matters because the ceiling has not changed. Every euro Italy puts under the energy heading is a euro it cannot put under defence. Rome made that choice. The government had planned to borrow about €14.9 billion through SAFE, an EU programme offering 45-year defence loans at favourable rates, before cutting the request to roughly €5 billion (Il Foglio, Euronews). That means giving up around €10 billion in military investment. Defence Minister Guido Crosetto put it plainly: "Politically, I know my request isn't popular, but I'm doing this for the country."

Refusing SAFE is not a saving in any meaningful sense. It means walking away from cheap financing for tanks, satellites and fighter jets while Europe's security environment is under its heaviest pressure in decades.

Green Investments, Not Fuel Discounts

The second limit is what the money may pay for. The Commission has excluded fossil fuel subsidies, including the fuel tax cuts Italy has repeatedly renewed at high cost. Eligible spending is limited to green investment: renewables, electricity grids, battery storage, heat pumps and electric vehicles.

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

So the Italian shorthand of "€14 billion for energy costs" is doing too much work. The money is for the energy transition. It is not a cheque for cheaper petrol.

Who Can Actually Spend It

The clause is available to all 27 EU member states if they ask for it. In practice, access depends on the condition of each country's public finances. Ten countries are under the Excessive Deficit Procedure, the EU process for states whose deficits exceed 3% of GDP. Any new spending they claim must still fit within binding plans to bring deficits down.

France shows the problem clearly. Paris is in the procedure and is trying to bring its deficit under control by the end of the decade. The French finance ministry has said nothing about the energy clause. That silence tells its own story: for a government already under pressure to cut spending, flexibility can exist on paper while remaining politically unusable.

The Commission's approach is visible. It has given governments a headline while keeping the structure of fiscal discipline in place. High-debt countries, supposedly the main beneficiaries, have been slow to activate even the original defence clause. Italy received recognition. Brussels kept the rules.

EU finance ministers meet as Ecofin on June 11. The European Council follows on June 18-19. Both still have to approve the arrangement. If the ceiling keeps being stretched to fit each new crisis, the real test is what the ceiling is still meant to enforce.