Italy confirms 2025 deficit at 3.1% of GDP, delaying exit from EU corrective procedure

Final deficit figure and European fiscal rules

Italy's national statistics bureau Istat confirmed on Tuesday that the country's public deficit reached 3.1% of gross domestic product in 2025, matching the preliminary estimate published in April. The reading represents a narrowing from the 3.4% deficit recorded in 2024, but keeps Italy above the European Union's 3.0% deficit ceiling. The confirmation prevents the Italian government from securing an early exit from the EU excessive deficit procedure opened against Rome in 2024. Economy Minister Giancarlo Giorgetti acknowledged the statistical confirmation in an official statement on Tuesday.

We take note, not without sadness, of the definitive data released by Istat regarding the 2025 deficit-to-GDP ratio. Unfortunately, Italy will not exit the excessive deficit procedure early this year as we had hoped; however, in line with the figures already set out in the Economic and Financial Document, this may occur in 2027.

Budget constraints and defense expenditure plans

Remaining inside the corrective arm of the EU fiscal framework restricts the government's fiscal space ahead of drafting its next budget law. Falling below the 3.0% threshold would have allowed Rome to access European flexibility provisions and unlocked an estimated €10 billion margin for the budget. While the European safeguard clause permits member states to deviate temporarily from agreed fiscal paths for exceptional spending, any additional borrowing under the corrective procedure continues to count toward Italy's required deficit adjustment. The government previously tied its defense investment targets to an early exit from the procedure. Rome's public finance plans target an increase in defense and security spending of up to 0.5 percentage points of GDP by 2028, amounting to approximately €12 billion, partly channeled through the European Safe initiative.

Upward revisions to gross domestic product

Alongside the deficit confirmation, Istat adjusted Italy's macroeconomic output figures upwards across recent reporting periods. Gross domestic product at market prices reached €2,265,003 million in 2025, an upward revision of €6,954 million relative to the March estimate. The statistical agency also revised 2024 GDP upward by €8,564 million. Real volume GDP grew by 0.6% in 2025, which is 0.1 percentage points higher than the previous March calculation. Furthermore, revised data lifted real GDP growth for 2024 to 1.1%, an increase of 0.3 percentage points over earlier estimates.

Sector performance and public finance balances

Underlying economic growth in 2025 varied across Italian industry sectors and expenditure categories. Gross fixed capital formation expanded by 3.9% in volume terms, while national final consumption grew by 1.0%. Foreign trade saw import volumes increase by 4.2% and export volumes grow by 1.7%. Across specific production sectors, construction activity led with a 2.6% increase in volume value added, followed by agriculture, forestry, and fishing at 0.8%, industry at 0.4%, and the tertiary service sector at 0.3%.

Revenue, debt servicing, and next European steps

Italy's overall tax burden reached 42.9% of GDP in 2025, marking a 0.7 percentage point increase compared to the previous year. The state primary balance, which measures net borrowing excluding interest payments, recorded a surplus of 0.8% of GDP, up from a 0.5% surplus in 2024. Total interest expenditure on public debt grew by 2%, representing a slower pace of expansion than the previous year. Istat will transmit these verified national accounts to the European Commission ahead of Eurostat's formal deficit and debt notification scheduled for October.