ROME — Italy has juggled its definition of what constitutes defense spending to beef up its budget by €14 billion ($16.3 billion) this year, but has failed to explain how it did it, one of Italy’s leading economists has complained.
Carlo Cottarelli said that Italy raised its spending, on paper, from around 1.5% of GDP in 2024 to 2% in 2025 “without a clear explanation” of how it did it.
“Should we consider ourselves more secure than last year? We don’t know,” said Cottarelli, a former Italian senator and director with the International Monetary Fund who teaches at Milan’s Catholic University of the Sacred Heart.
The Italian government first committed to hitting 2% in April, thus getting Italian spending to the level first promised to NATO in 2014 and never attained.
The announcement was made ahead of the NATO conference in June when members agreed to raise spending again to 3.5% of GDP by 2035, plus another 1.5% on defense-related infrastructure spending.
Rome released the first details of how it would hit 2% in October with the much-delayed release of its 2025 defense budget.
The document said Italy would spend €31.3 billion on defense this year, up 7.2% on last year, but added that various expenditures were being reclassified as defense spending to boost the budget further – at least on paper.
Pension outlays would be included, as well as other budgets which would be given “a more military focus.” The document also stated that “military cooperation projects” would be factored in.
Adding those outlays would make official spending shoot up by €14 billion to €45.3 billion, hitting the 2% target, the document stated.
In a report produced by Cottarelli last month, the economist quoted a statement to parliament given this year by Italian Defense Minister Guido Crosetto in which the minister said reaching 2% had also involved including spending by Italy’s tax police and coast guard, as well as outlays on space and cyber defense.
“Just as other countries do,” Crosetto said.
But Cottarelli argued in his report the scant detail on the new spending was insufficient.
“It’s not clear from the words of the minister or from official documents what this reclassification consists of. Is it existing spending that now has a ‘more military’ connotation than in the past, or has it been understood that some spending is more military than previously thought? Additionally it is not known which spending is involved,” Cottarelli wrote.
He told Defense News no new information had been released since he wrote the report.
The Italian defense ministry did not respond to requests for comment.
Despite the complaint of lack of information about the massive leap to 2%, a NATO official told Defense News that NATO was satisfied with Italy’s reclassification of spending.
“The defense expenditures declared by Italy are consistent with the NATO definition of defense expenditure and the approach is also applied by other allies,” the official said.
Asked to give a breakdown of the spending Italy has reclassified as defense spending, the official stated, “I refer you to the Italian authorities, for any further comments in this respect.”
Tom Kington is the Italy correspondent for Defense News.
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