Italy is in discussion with Brussels about how it could make use of the national escape clause from European Union fiscal rules to boost defence spending even though it remains in an excessive deficit procedure which is set to last another two years, MNI understands.
The national escape clause allows countries to temporarily deviate from EU-approved net expenditure paths for up to four years by a margin of 1.5% of GDP, while the EDP is designed to ensure countries return fiscal deficits to the usual limit of 3% of GDP. (See MNI: Italy Seeks Support For 5% Defence Target Delay-Officials)
The dilemma facing Italy is that it would still remain in the EDP for a further two years on the basis of current forecasts, so any benefit from the leeway afforded by the four-year NEC would be delayed.
While Italy is considering requesting an NEC, exiting the EDP remains the country's priority, MNI understands.
The Commission is also likely to sign off on Germany's medium-term fiscal structural plan next month, paving the way for EU states to give their final approval this autumn, an official said.