Italy Approves 2026 Budget Aiming for EU Deficit Compliance

Italy's lower house of parliament has approved the government's 2026 budget, marking a crucial step in the country's effort to align with European Union fiscal rules. Passed on December 30, 2024, the budget aims to reduce Italy's fiscal deficit to 2.8% of GDP by 2026, down from a targeted 3% in 2025. This move is intended to facilitate Italy's exit from an EU excessive deficit procedure by 2026. However, the country's public debt is projected to rise to 137.4% of GDP, maintaining its position as the second highest in the eurozone after Greece GR.

The budget, which represents the fourth under Prime Minister Giorgia Meloni giorgia meloni, was passed with a vote of 216 to 126, underscoring the support of the rightwing coalition. The package includes approximately €22 billion in tax cuts and spending increases, primarily benefiting low- and middle-income workers and firms investing in high-tech capital equipment. More than 25% of the funding, amounting to €5-6 billion, will be sourced from tax hikes on the financial sector, impacting major Italian banks and insurers such as Banca Monte dei Paschi di Siena BMPS, UniCredit UCG, Intesa Sanpaolo ISP, and Generali G.