Italy says can exit EU deficit procedure in 2026, ahead of schedule

ROME (Reuters) -Italy aims to exit the European Union's infringement procedure for its excessive budget deficit as early as next year, ahead of schedule, Economy Minister Giancarlo Giorgetti said on Thursday, suggesting the deficit may fall below 3% of output in 2025.

Addressing lawmakers in the upper house of parliament, Giorgetti said no additional tax hikes or spending cuts would be needed to meet the government's multi-year budget goals approved by cabinet in April.

Under those targets, the government pledged to cut the fiscal gap to 3.3% of gross domestic product (GDP) this year from 3.4% in 2024, and to 2.8% in 2026, below the European Union's 3% of GDP ceiling.

"Mid-year data are consistent with a year-on-year deficit of 3.3%," Giorgetti said.

However, he added that "we aim to exit the excessive deficit procedure as early as next year."

Being under a so-called "excessive deficit procedure" reduces countries' room for manoeuvre in taxation and spending policy because they have to cut their fiscal gap by a prescribed amount each year until it is below 3% of GDP.

Bringing the deficit below 3% in 2026, as currently planned, would mean the European authorities would normally close the procedure by mid-2027.

Asked to clarify, Giorgetti reiterated that it was possible that Italy could exit the procedure a year early.

"It depends on GDP and spending trends. The philosophy of this ministry is to under-promise and over-deliver," he said.

Giorgetti also said he was in talks with Brussels to secure some flexibility in the application to Italy of a clause designed to allow more investment on defence, without triggering disciplinary steps.

"The latest talks have given us some room for manoeuvre that goes in the direction we wanted," he said, without giving further details.

(Reporting by Giuseppe Fonte, editing by Gavin Jones)