Tighter fiscal policies in 2027 and 2028: ECB prepares for austerity measures

Brussels – Bad news for the eurozone, Italy, and the Meloni government: the common agenda imposes painful austerity measures. The latest Economic Bulletin from the European Central Bank makes it clear that, at least in the short term, there will be no room for expansionary policies: this means spending under control, cuts, and budgetary rigour. “After a slight tightening in 2025, the euro area fiscal stance is projected to loosen in 2026 and tighten again in 2027 and 2028,” the ECB warns in its Bulletin. 

For that matter, “the euro area debt-to-GDP ratio is set on a rising path,” and this is especially true for Italy, as also highlighted in the European Commission’s autumn economic forecast. The country is at serious risk of exceeding even Greece’s debt, and for Italy, as for the rest of its European partners, “adjusted for grants extended to countries under the Next Generation EU programme, the cycle points to a modest tightening over the coming years, except in 2026.” 

Once the economic stimulus from the European recovery plan has run its course and the resources of the Recovery Fund underpinning national recovery plans (PNRR) have been exhausted, the lean years will return. “In 2028, the euro area fiscal stance is expected to continue tightening, albeit at a somewhat slower pace than in 2027,” the ECB’s economic bulletin states.

For the Meloni government, this leaves only one possible choice. Since it has no intention of introducing wealth taxes or raising direct taxes, services will have to be cut to bring the public finances back in order. It cannot even consider increasing civil servants’ salaries, as doing so would raise expenditure. With the majority parties already looking ahead to the 2027 elections, seeking re-election with inevitable austerity measures complicates matters. This is what Europe wanted, and Italy was present at the table when the decisions were made.