EU allows budget deficit flexibility for energy projects, allocating €14.4B to Italy

European Commission budget framework

The European Commission published a guidance document in the EU Official Journal outlining an illustrative list of 22 eligible measures under the Stability and Growth Pact national safeguard clause. The mechanism allows member states to temporarily deviate from fiscal limits to finance projects that reduce dependence on fossil fuels and strengthen energy security. Under the rules, countries can spend up to a cumulative 0.6% of gross domestic product over the 2026–2028 period without counting the outlays toward the standard 3% deficit ceiling. Annual spending under the energy clause cannot exceed 0.3% of gross domestic product, operating within the 1.5% ceiling already granted for defense expenditure. For Italy, the mechanism provides approximately €14.4 billion in fiscal headroom across the three-year period, rising to €35 billion to €36 billion if combined with defense provisions.

Eligible sectors and spending exclusions

The Commission structured the 22 eligible categories across five areas: households, the public sector, commercial enterprises, transport infrastructure, and the energy industry. Authorised investments include nuclear power facilities, solar photovoltaic panels, heat pump installations, residential battery storage, grid modernization, and electric vehicle charging points. For households, the framework supports subsidies to replace fossil fuel boilers with heat pumps and funds for building renovation schemes such as Italy's Conto Termico, which reimburses up to 65% of renewable heat costs. Transport measures encompass public transit fare discounts for students and young people. However, the Commission explicitly excluded direct purchase subsidies for electric vehicles. Brussels also prohibited using the clause for cuts to fuel excise duties, direct energy bill relief, or fossil fuel price subsidies, requiring all funded measures to be targeted and cost-effective.

Italian government response and nuclear policy

Italian officials endorsed the European Commission's decision to include nuclear energy and clean technology investments within the scope of permissible deficit spending. While Italy does not have active nuclear plant construction underway, the classification allows public funding for nuclear research and long-term infrastructure planning. Environment and Energy Security Minister Gilberto Pichetto Fratin praised the decision to list atomic power among valid security investments.

It is a significant recognition of the relevance that nuclear power can have in strengthening the security and resilience of the European energy system and in the energy transition pathway.

Deputy Prime Minister and Foreign Minister Antonio Tajani also backed the energy framework for Italian national policy.

The government has started the process for adopting this technology, looking at sustainable and safe facilities.

Budgetary restrictions and submission timeline

The European Commission imposed strict timing conditions that restrict how Rome can allocate its €14.4 billion allotment. The Commission ruled that only measures adopted after 28 February 2026 qualify for the deficit exemption, preventing retrospective budget adjustments. This rule blocks Italy from applying the flexibility to its €5 billion energy bill decree passed on 20 February 2026. Italian ministries are reviewing technical eligibility, public finance profiles, and potential storage incentives, including batteries and pumped hydro. Italian authorities plan to submit their finalised investment program to Brussels in early September 2026, with the European Commission scheduled to deliver its formal recommendations later that month.