The guardian of budget discipline was once: Giorgia Meloni wants to go into the election campaign with full state coffers

It wasn’t long ago that Giorgia Meloni was collecting compliments on the international stage for her stability course. The business press praised Italy’s head of government highly. And the rating agencies recognized their solid financial policy: at the end of 2025, they raised the heavily indebted country’s credit rating for the first time in 23 years. In January, the risk premium that Italy must allow buyers of Roman government bonds fell to its lowest level since 2011.

For Meloni, the prudent strategy paid off: during her 44 months in office, the right-wing populist was long seen as a politician who could stabilize Italy.

Implied threat

But this picture now shows deep cracks. With a U-turn in Roman budget policy, Meloni is undermining an essential basis of their success. The change in direction was triggered by the start of the Iran war almost three months ago, the economic consequences of which hit Italy particularly hard. This week the Italian completely abandoned her role as guardian of budget discipline.

In view of the massive increase in energy prices, Meloni urged EU Commission President Ursula von der Leyen in mid-May to suspend the stability pact and relax the European Union’s budget rules, which have been in force since 2024. The Italian head of government wants to take on more debt than permitted in order to cushion the rising energy costs of families and companies.

In a letter to “dear Ursula” Meloni linked her demand with a threat. If Brussels does not grant more leeway when it comes to taking on debt, its government will not be able to explain to the population why “the EU allows financial flexibility for security and defense, but not to protect against a new energy crisis.” Lacking “this necessary coherence” would make it difficult for Rome to make use of the Safe program to strengthen Europe’s military capability.

This would put Italy at odds on a central strategic issue. In response to US President Donald Trump’s break with European allies, the EU Commission is now granting member states loans for additional defense spending.

Meloni could not take the reactions from Brussels to her threatening letter as encouragement. There was initially no apparent willingness to suspend the Stability Pact. Nevertheless, Meloni upped the ante on Thursday. “Europe needs a new phase,” she said at a meeting of the Italian farmers’ association Coldiretti.

Only a change of course could prevent Europe from slipping into insignificance. She called for “realism” in order to escape Brussels’ “ideological and bureaucratic drift”. It was a déjà vu experience: the dashing campaigner Giorgia Meloni is back.

At the same time, it became clear in Brussels why the EU partners and also Commission President von der Leyen might find it difficult to give in to Meloni this time. In its spring forecast on Thursday, the EU Commission painted a sobering picture of economic development in Europe as a result of the Iran war. Things look particularly bad in Italy: 0.5 percent growth in 2026, at best 0.6 percent in 2027 – less than half of the EU level. In 2027, Italy will be at the bottom of the 27 member states.

Fuel discounts despite a tight state treasury

This is causing unrest among European partners because the combination is delicate: Italy is in last place in terms of growth and will soon be at the top in terms of debt. According to a forecast, the debt ratio will climb from 135 percent in 2025 to a good 139 percent next year. That would be the highest value in the EU, even ahead of Greece.

Before Meloni receives an official response from Brussels next week, EU Economic Commissioner Valdis Dombrovskis called on governments to exercise “budgetary discipline”. This is particularly true for countries with high levels of debt. The Latvian also pointed out that measures to cap energy prices should only be used “temporarily and in a targeted manner”. Under no circumstances should they serve to support or increase demand for fossil fuels. Governments are spending “enormous sums of money for little benefit,” he warned.

Meanwhile, the cabinet in Rome extended a temporary tax discount on fuel prices for the third time on Friday evening. The officials in the Ministry of Finance are finding it increasingly difficult to find the money from the state coffers to finance the measure – which is probably why Meloni has now turned directly to von der Leyen.

The government has so far scraped together 1.7 billion euros for fuel discounts. However, that is just a drop in the ocean. Italy is suffering particularly badly from rising energy prices. On the one hand, the country is heavily dependent on imported natural gas, and on the other hand, the population has been hit hard by the significant losses in purchasing power over the past five years. The mood is bad a year before the parliamentary elections.

This is a big problem for Meloni: reality is now catching up with her. And after three and a half years in power, it fits less and less with their narrative of a superior, prosperous nation. If you ask Italians what their biggest problem is, by far most of them say inflation. Migrants are in eighth place among “also ran”.

“Avvenire”, the daily newspaper of the Italian Bishops’ Conference, mocks Italy’s economic weakness: “The growth figures are almost as worrying as the performance of the Italian football team.” Alessandro Fontana, chief economist of the Italian industrial association Confindustria, also sounded the alarm on Wednesday: “If the war and the closure of the Strait of Hormuz continue beyond the summer, a recession will be within reach.”

That explains why Meloni wants to go into the election campaign with his state coffers full.