MNI: Italy Seeks Support For 5% Defence Target Delay-Officials

The Italian government is exploring ways to delay the implementation of a likely new NATO defence spending target – widely expected to be set at reaching 5% of GDP by 2032 – until 2035, while also seeking an extension of EU fiscal rule exemptions for defence spending, European and Italian sources told MNI.

Rome is coordinating discreetly with other European countries, including the UK and France, which have both expressed scepticism about both the scale and timeline of the proposed 5% target, sources said.

Some large EU states argue that before committing to a new percentage threshold, countries must first ensure sufficient supply and production capacity to avoid dependency on foreign arms and equipment, one official told MNI.

Countries which have met the existing 2% NATO target for years such as France stress that they – unlike many others – have accumulated a larger stockpile of defence assets which could be deployed without a drastic increase in spending.

The new NATO target is expected to be officially announced later this month, though Secretary General Mark Rutte has already floated the idea of a combined benchmark of 3.5% of GDP for core defence spending plus 1.5% for defence-related expenditures.

Italian officials continue to regard the target as highly ambitious and emphasise the need for further support through new European common debt or greater flexibility on fiscal rules to give the country more room within its already tight public finances (See MNI: Italy Eyes Transition To New NATO Target-Treasury Sources)

“We can invest in defence at the expense of other areas, which would reduce growth,” an Italian official said, adding that the path toward higher spending will be politically delicate and will require time.

Rome has announced that it will reach the still-official 2% target this year, in part by including expenditures such as on military pensions and the Coast Guard. It also aims to expand its domestic defence sector to help support growth and offset the increase in public debt.

EXTENDING ESCAPE CLAUSE

Italy’s push to extend the current four-year national escape clause from the EU’s fiscal rules to allow increased defence spending would require bilateral approval and could face resistance, EU officials told MNI.

“Firstly, particularly in the case of Italy and other high-debt states, it would run up against the issue of fiscal credibility, which was key to the Commission proposal to limit the NEC to four years,” an official said, adding that such a move could also prompt objections from countries already bound by the same limit.

Rome is awaiting clarity on the final NATO spending target before making a decision on triggering the escape clause, but an official said this option would become more likely if the target is set higher.

Brussels is also closely watching the outcome of the NATO summit to gauge its impact on the bloc’s fiscal debate. Officials remain cautious, however, suggesting that defence spending may follow a relatively shallow trajectory over the coming years as industry capacity and output take time to build.

Foreign ministers from the UK, Germany, France, Poland, Italy and Spain, along with EU foreign policy chief Kaja Kallas, are meeting in Rome on Thursday to discuss the issue, just two weeks ahead of the NATO summit.