Italy weighs defense-spending cut as 10-year BTP yield falls below 4.7%

Oct 2, 2026 08:08 (22d ago)

Italy is preparing to cut additional defense spending as it seeks to reduce borrowing and bring the deficit below the EU’s 3% of GDP limit.
The defense allocation could fall to 0.6% of GDP from 0.9%, while 10-year BTP yields eased below 4.7% from a three-year high.
Italy’s 2025 deficit was confirmed at 3.1% of GDP, and Meloni’s 2027 budget will be her final budget before next year’s election.

Italy’s government is preparing a late budget revision that would reduce additional defense spending while seeking to narrow the deficit below the European Union’s 3% of gross domestic product ceiling. Growth of almost 1% this year and about 0.6% in 2027 would support the plan, while Italy’s 10-year BTP yield fell below 4.7% from a three-year high as markets assessed inflation and fiscal risks. The 2025 deficit was confirmed at 3.1% of GDP, above the EU’s Excessive Deficit Procedure ceiling, while a reported defense allocation cut to 0.6% of GDP from 0.9% could ease pressure on Italian bonds. The revisions will underpin Prime Minister Giorgia Meloni’s 2027 budget, her final budget before a national election due next year.