On 22 June 2026, the Council of the European Union published a recommendation outlining economic, social, employment, structural and budgetary policies for Italy, urging the country to respect binding net expenditure growth limits and address macroeconomic imbalances. The recommendation, to be formally adopted at the Council meeting on 24 June 2026, sets maximum annual net expenditure growth rates of 1.6% in 2026, 1.9% in 2027, 1.7% in 2028, and 1.5% in 2029, with cumulative growth from a 2023 base reaching 6.2% by 2029. Italy is flagged as experiencing macroeconomic imbalances, including high government debt at 137.1% of GDP at end-2025 (projected to rise to 139.2% by end-2027), weak productivity growth, and a high sovereign-banks nexus. The excessive deficit procedure remains in abeyance following the Commission's assessment of 3 June 2026.
The recommendation builds on Italy's medium-term fiscal-structural plan and its recovery and resilience plan, with a key step due in Q4-2025 on R&D expenditure appearing on track. The Council calls for continued implementation of reforms and investments under these plans. On fiscal policy, the Commission recommends shifting the tax burden from labour to other bases, updating cadastral values to improve property tax equity, and enhancing public spending efficiency. Structural reforms should target housing affordability, low labour market participation among women and youth, and brain drain, while boosting productivity and reducing the sovereign-bank nexus.
Italian taxpayers face continued fiscal consolidation with net expenditure caps limiting public services and investment, though tax shifts from labour could reduce payroll costs for workers and employers. Italian businesses, particularly in R&D-intensive sectors, may benefit from the planned R&D expenditure step. The banking sector could see reduced sovereign exposure if the nexus is addressed, but higher capital requirements may follow. The Italian government must navigate tight spending limits while pursuing reforms, risking political friction over tax and cadastral updates. Institutional follow-up: The Council will monitor Italy's compliance through the European Semester, and the Commission may recommend moving from abeyance to active excessive deficit procedure if spending targets are breached.