Italy harbors doubts about hitting 2 percent NATO target

ROME — Italy’s government is privately unsure that its plan to reach NATO’s defense spending target of 2 percent of GDP will pass muster, despite public assurances to the contrary.

The government has said it will be able to reclassify existing civil expenditures to reach that target — but two Italian officials familiar with the budget discussion believe this may not convince the European Commission or NATO.

The uncertainty comes amid ongoing pressure from Washington that NATO members fork over as much as 5 percent of their annual gross domestic product for defense. 

Finance Minister Giancarlo Giorgetti said earlier this week that Italy would be able to raise its defense expenditure to 2 percent of GDP by the end of 2025 by including the costs of existing defense-adjacent infrastructure, such as the financial police and the coast guard.

That would allow Italy to avoid increasing its defense expenditures in absolute terms, which would risk diverting resources from other politically sensitive services such as the country’s flailing healthcare system. 

The Italian parliament’s lower chamber on Thursday will debate and vote on the projections Giorgetti outlined last week.

But there are doubts as to whether the European Commission and NATO will accept the accounting trick when they assess Italy’s finances later this year. Rome expects to face political pressure at the NATO summit in June, from both the Trump administration and the European Union, to increase the amount committed, the officials told POLITICO. Both were granted anonymity because they were not authorized to speak to the press.

They also said it is possible that NATO and the Commission will challenge the legal justification for the move. While Rome’s current arguments are sound, the officials added, the accounting criteria applied by NATO and the EU are likely to come under review later this year as both institutions reassess members’ commitments.

“Of course, there will be political pressure from both [the] EU and NATO to spend more,” one of the officials said, noting that the 2 percent target is just a “baseline.”

As a result, the officials added, it is possible that Rome will be forced to eat into other budgets to drum up fresh funds for defense. It might also initially hit the 2 percent target and then gradually trim that amount to focus on the “maintenance” of its armed forces. 

But the official quoted above also emphasized that the creative accounting had been carefully designed to withstand legal scrutiny. While pressure will be “unavoidable,” the official added, Rome might be able to get away with spending only a small amount that is more in a “way the Americans like,” such as by buying American weapons systems, and spending relatively less on personnel and so-called dual-use goods, or goods that are also used for non-defense purposes.

Defense spending has become a major priority in Rome as Washington’s commitment to Europe becomes increasingly tenuous and United States President Donald Trump asks much higher spending from NATO allies. Last week, Prime Minister Giorgia Meloni included upping Italy’s defense outlays as part of her pitch to Trump for a revival of U.S.-European cooperation and a deal on reduced tariffs. 

At the same time, the matter has become politically toxic. The broad push for rearmament in Europe has been hugely unpopular in Italy, which faces a new round of austerity as the government seeks to stabilize its finances. While Italy is one of the EU’s lowest spenders on defense, at only 1.49  percent of GDP last year, it is also among several EU countries under strict orders from Brussels to rein in its deficit after spending exploded during the pandemic. 

The Commission has floated exempting up to 1.5 percent of GDP in new defense expenditures annually from deficit calculations. But last week, Giorgetti told Italian lawmakers that the government would not accept that option, instead including civil infrastructure in its calculations.