On 3 July 2026, the Council of the European Union adopted a recommendation on Italy's economic, social, employment, structural and budgetary policies, urging the country to adhere to its medium-term fiscal-structural plan for 2025-2029. The recommendation sets maximum net expenditure growth rates of 1.6% in 2026, 1.9% in 2027, 1.7% in 2028 and 1.5% in 2029, and calls for reforms to address high government debt and weak productivity growth.
The recommendation follows the Commission's finding that Italy is experiencing macroeconomic imbalances, with vulnerabilities from high government debt and weak productivity. Government debt rose from 134.7% of GDP at end-2024 to 137.1% at end-2025, and is projected to reach 139.2% by end-2027. The excessive deficit procedure for Italy was held in abeyance as of 3 June 2026. The Council's recommendation is part of the European Semester cycle, which coordinates EU countries' economic policies.
Italy is required to keep net expenditure growth at or below the recommended maximum rates for each year. The Council also recommends shifting the tax burden from labour to other revenue sources, reducing tax evasion, and redesigning vehicle taxation to reflect CO2 emissions. Italy should update cadastral values and address housing affordability, including through the Piano Casa initiative. To improve public spending efficiency, the country should implement new Spending Analysis and Evaluation Plans. Additionally, the Council calls for boosting workforce participation among women and young people.
The recommendation impacts several stakeholders. Italian taxpayers may benefit from a reduced tax burden on labour but could face higher taxes on vehicles and property if cadastral values are updated. The Italian government must implement structural reforms and maintain fiscal discipline, which may be politically challenging. Businesses may see improved productivity and a more efficient public sector, but could face higher compliance costs from tax changes. The European Commission and other EU institutions will monitor Italy's compliance with the fiscal plan and reform commitments. The Council's recommendation is not legally binding but carries political weight within the EU's economic governance framework. The next steps include Italy's implementation of the recommended policies and the Commission's assessment in subsequent European Semester cycles.