Italy’s Parliament approves 2026 budget with deficit-cutting measures

Italy’s parliament has approved the government’s 2026 budget plan that aims to reduce the country’s deficit in line with European Union requirements. The budget, worth approximately 22 billion euros ($25.9 billion), passed with a final vote of 216-126 in the lower house on Tuesday.

The conservative coalition government led by Prime Minister Giorgia Meloni has crafted a package designed to lower Italy’s deficit to 2.8% of gross domestic product by 2026, down from the previously targeted 3%. This adjustment aligns with fiscal parameters established by the European Union, which has been pressuring member states to maintain stricter fiscal discipline following pandemic-era spending increases.

“The budget is serious and responsible, built in a challenging context, which concentrates the limited resources available on families, work, businesses and health care,” Meloni stated on social media platform X after the vote.

The budget’s approval comes amid ongoing economic challenges for Italy, which continues to struggle with one of the highest public debt levels in the eurozone. The country’s debt-to-GDP ratio currently hovers around 140%, making fiscal consolidation a priority for maintaining investor confidence and satisfying EU economic governance rules.

A notable feature of the budget is its funding structure, with approximately 25% of resources coming from the financial sector through increased taxation on banks and insurance companies. This approach has drawn concern from the European Central Bank, which warned that these levies could potentially reduce credit availability to Italian households and businesses at a time when economic growth remains fragile.

The ECB’s caution reflects broader worries about Italy’s economic resilience, particularly as European monetary policy has tightened over the past two years. Higher borrowing costs have put additional pressure on Italy’s debt servicing capabilities, making deficit reduction more urgent.

Opposition parties have strongly criticized the budget’s direction and priorities. Elly Schlein, who leads the center-left Democratic Party, characterized the fiscal plan as rooted in austerity principles that fail to address fundamental economic problems facing ordinary Italians.

“This budget does nothing to help low-income workers and families cope with rising prices,” Schlein argued during parliamentary debates. Critics point to Italy’s stagnant wage growth and high tax burden as unaddressed issues that continue to hamper consumer spending and economic mobility.

The center-left opposition has particularly focused on the budget’s perceived inadequacy in tackling Italy’s growing income inequality. They argue that more substantial interventions are needed to boost purchasing power for average Italians, who have seen their real incomes eroded by inflation over the past two years.

Italy’s economic growth forecast remains modest compared to many EU counterparts, with projections hovering around 1% for the coming years. This sluggish expansion adds to the challenge of fiscal consolidation while trying to stimulate economic activity.

The Meloni government has defended its approach as balancing necessary fiscal restraint with targeted support for key sectors. The budget includes provisions for healthcare, family support, and business incentives, though critics argue these allocations are insufficient given the scale of Italy’s economic challenges.

The approved fiscal plan represents a critical test for Meloni’s government, which must navigate between EU fiscal requirements and domestic pressures for more expansive spending. As Italy implements this budget over the coming years, its success will be measured not only by deficit reduction but also by its impact on economic growth, employment, and living standards across the country.