ROME — Italy’s 2026 budget bill became law on Tuesday after parliament approved it following weeks of political wrangling. The Lower House passed the bill after a confidence vote, approving it by 216 votes to 126, with three abstentions.
The package includes around €22billion in new measures, including €3.5billion added through a late government amendment.
The budget sparked tensions inside the ruling coalition backing Prime Minister Giorgia Meloni, including disputes over early state pension rules. Proposed changes to pension eligibility caused outrage, including within Economy Minister Giancarlo Giorgetti’s own League party. The government later adjusted the measures, easing internal pressure.
Unions and opposition parties have continued to criticise the budget, saying it does too little to boost growth or strengthen public healthcare.
The package has also drawn criticism for raising defence spending in line with demands from US President Donald Trump on NATO allies.
Opponents also accuse the government of breaking a key pre-election pledge by hiking diesel fuel duties.
One headline measure cuts the second band of IRPEF income tax for earnings between €28,000 and €50,000. The rate will fall from 35% to 33%.
The budget also introduces extra levies on banks and insurers worth about 4.4 billion euros to help fund the measures.
Looking to reduce deficit to less than 3% of GDP
Italy’s room for manoeuvre remains limited as the government seeks to bring the deficit below 3% of GDP. Doing so would allow Rome to exit the EU’s excessive-deficit procedure. The European Commission expects Italy’s deficit to reach 3% in 2025, before falling to 2.8% in 2026.
IMF Managing Director Kristalina Georgieva recently praised Meloni’s handling of public finances. She said Italy had become “an anchor of stability in Europe”. Giorgetti said the government had achieved results that “seemed impossible” with the budget.
Before the final vote, Democratic Party leader Elly Schlein strongly attacked the package. “Italians’ primary concerns are the high cost of living and healthcare waiting lists,” she said. “These are the things that give people dignity: eating and receiving medical care. We’re talking about the living flesh.”
“This budget that fails to address Italians’ primary concerns is mistaken; it’s an austerity budget that envisions zero growth,” she added. Schlein also said: “It’s a budget that helps the richest, cutting public healthcare, cutting public schools and universities, and opening up avenues for the private sector.”
Meloni defends budget
PD lawmakers held placards reading “Meloni Disaster”. +Europa leader Riccardo Magi held up another saying “for sale”. Meloni defended the package, calling it responsible in a difficult context.
“Parliament has approved the 2026 Budget Law,” she said. “It is a serious and responsible budget, crafted in a complex context, which focuses the limited resources available on a few key priorities.”
She listed “families, employment, businesses, and healthcare”. “We are continuing on the path of reducing income tax for the middle class,” Meloni said. She also cited support for birth rates, jobs, public healthcare, and investment. “This is another step forward in providing certainty to the nation,” she added.
Giorgetti said the budget raised wages, as many had requested. “The key point of this measure is something that’s been discussed for a long time but barely implemented,” he said. “We’ve effectively exempted wage increases from taxes.”
He added that frozen public contracts had been unlocked, producing “concrete increases in salaries and wages”. “Taxing wage increases at 5% and productivity-related wages at 1% is a very important signal,” Giorgetti said.
He also rejected claims that defence spending came at the expense of welfare. “On arms spending, we have not removed a single euro from social spending,” he said. The government will review defence spending in the spring, he added, once Italy’s fiscal position becomes clearer.
On pensions, Giorgetti denied raising the retirement age. “In reality, the government’s intervention reduced the increase by two months in 2027,” he said. He added that the government would try to remove the remaining increase if public finances allow.
