Mobilising private savings: Italy’s plan for EU Defence #ItalyFinance

Finance Minister Giancarlo Giorgetti has proposed a groundbreaking plan to mobilise up to €200 billion of private defence investment, backed by a €16.7 billion public guarantee, while excluding defence spending from the Stability Pact. Garnering favourable support from EU finance ministers, the initiative aims to boost European rearmament without increasing national debt, highlighting key issues of fiscal flexibility and sustainable growth

Driving the news. At Tuesday’s Economic and Financial Affairs Council, Italy’s bold proposal to exempt defence spending from the Stability Pact has been lauded across the EU.

• Italian Finance Minister Giancarlo Giorgetti has outlined an innovative plan to mobilise up to €200 billion of private investment in defence, backed by a public guarantee of €16.7 billion – without increasing Italy’s national debt.

Why it matters. This proposal is designed to complement the massive EU financial support plan for rearmament (ReArm Europe)–an €800 billion package combining derogations from national spending limits and additional EU loans.

• Giorgetti warned that defence funding must not come at the expense of healthcare and public services.
• Meanwhile, concerns linger that a surge in public defence investments could drive up debt costs, particularly in light of rising German debt spreads.
  • At the same time, France has explicitly ruled out using the safeguard clause due to its limited fiscal manoeuvrability.

Broad EU endorsement. Italy’s approach is gathering support from key EU figures.

• Polish Finance Minister Andrzej Domanski and EU Commissioner for the Economy Valdis Dombrovskis have bothpraised the proposal’s potential to leverage private savings through instruments like InvestEu.
• French Finance Minister Éric Lombard described the plan as “very interesting” because of its capacity to mobilise private capital, even as fiscal constraints remain a concern.

Fiscal flexibility. The initiative is crafted to ensure fiscal sustainability.

• Dombrovskis emphasised that the new measures will be limited in both time and volume – constrained to four years and capped at 1.5% of GDP.
• This targeted flexibility is intended to secure a stable funding environment for European defence while preserving overall budgetary discipline.