Italy's Senate has passed the 2026 budget, which focuses on curbing fiscal deficits but includes a controversial amendment asserting national ownership of the central bank's gold reserves. On Tuesday, lawmakers in Rome voted in favor of the package, which centers on middle-class tax cuts, ending weeks of heated debate over pensions and central bank gold. However, the budget still requires approval from the lower house by year-end to take effect.
The bill is a key pillar of Prime Minister Giorgia Meloni's economic plan, proposing €9 billion ($10.6 billion) in tax cuts over three years. Italy, burdened with the eurozone's second-highest debt-to-GDP ratio exceeding 130%, faces tough trade-offs to reduce its massive debt load. Encouragingly, the deficit has already fallen below the EU's 3% threshold.
While the budget remains on track for approval this month—unlike France, which delayed similar measures to 2026—political infighting has emerged as a stumbling block, highlighting Meloni's growing challenges as she enters her fourth year in office.
The most contentious issue is an amendment declaring the Bank of Italy's gold reserves (2,453 tons) as national property, sparking a back-and-forth between Rome and the European Central Bank (ECB). Italy insists the move is symbolic, but the ECB has twice warned it risks undermining perceptions of the central bank's independence. Critics fear some supporters aim to tap the gold for fiscal purposes amid strained public finances.
Banks have also raised concerns over higher lender taxes, warning of potential credit supply disruptions. The ECB cautioned that excessive one-off measures could create uncertainty.
Despite Meloni's solid parliamentary majority, disputes involving the central bank, unions, and lenders suggest she may struggle to balance spending restraint with fiscal discipline ahead of the 2027 election—especially as markets and the EU watch closely.
Further complicating matters, Meloni must navigate a fractious coalition, including factions from her Brothers of Italy party and the League, some of whom question central bank independence—adding volatility to her governance.
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