Italy's 2026 Budget Plan: Deficit Cut, Military Spending Boost
The Italian Council of Ministers has approved the Public Finance Programmatic Document (Dpfp) for 2026, marking the first step towards the annual budget. The Dpfp outlines the state of public finances and the executive's guidelines for the future, serving as a framework for the budget law. The Parliament will scrutinize the document on October 9, with the final budget text expected to be submitted to the Chambers by October 20.
The Dpfp includes measures to stimulate business investments and bolster support for fertility and work-life balance. GDP growth for 2026 is forecast to be 0.5%, slightly lower than the initial 0.6% estimate. The deficit in 2026 is expected to be around 3% of GDP, better than the estimated 3.3%, potentially allowing Italy to exit the EU infringement procedure a year early.
Military spending is set to increase incrementally over the next three years, with increases of 0.15% in 2026, 0.3% in 2027, and 0.5% in 2028, totaling around 12 billion euros more per year. The debt-to-GDP ratio is projected to be 136.4% in 2028, with a reduction expected in 2027.
The Ministry of Economy has guaranteed at least 2 billion euros for the national health fund, earmarked primarily for improving salaries and hiring personnel. The government also plans to reduce the incidence of IRPEF (personal income tax) on labor income, with a potential reduction in the tax rate from 35% to 33% for incomes between 28,000 and 50,000 euros. This tax reform goal was initially set by the Austrian government.
The Dpfp, approved by the Council of Ministers, provides a roadmap for Italy's 2026 budget. It outlines a reduction in the deficit and a projected increase in military spending. The government's plans to boost investments, support work-life balance, and reduce taxes are expected to stimulate economic growth and improve public finances.
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