The war in Iran and the resulting energy crisis could push Italy into recession. The fear was apparently expressed by the Minister of Economy and Finance Giancarlo Giorgetti to the rest of the Government during a dinner, after some assessments on the ongoing conflict, even more valid after the failure of the negotiations between the USA and Tehran for a ceasefire.
The Government would aim to ask the European Union for a suspension of the Stability Pact, the rule that limits how much debt and how much deficit a member state can have and which Italy already violates in several places. The goal would be to access more deficit spending to counter the crisis.
Italy towards recession, the Government’s fears
The news of Giorgetti’s warning to Meloni and the rest of the Government was spread by the news agency Handle. The Minister of Economy would have said that if the energy crisis does not ease quickly, Italy’s GDP could not only not grow, but decrease in 2026 compared to the previous year.
The growth of our country has already slowed down significantly over the last few years:
- in 2022 the GDP had grown by 3.7%;
- in 2023 the GDP had grown by 1%;
- in 2024 the GDP had grown by 0.7%;
- in 2025 the GDP had grown by 0.5%.
For 2026, the government forecast a return to significant growth of around 0.8% during 2026, but a more recent new estimate from the OECD has reduced this outlook to 0.4%.
Because Italy risks recession
There are three reasons why Italian growth is particularly at risk in 2026:
- even without the crisis in the Middle East, our country is among those that are growing the least in the EU;
- in 2026 the financing and therefore the construction sites of the Pnrr will end;
- Italy is particularly exposed to the energy crisis.
2026 has always been considered a complex year for growth in Italy. In fact, in August the last construction sites of the Pnrr will be completed and the effects of the EU’s massive investment plan in our country will begin to fade. Some Confindustria estimates published last September estimated that, without the contribution of these funds, Italian GDP would have reduced as early as 2025.
The war in the Middle East and the resulting energy crisis have worsened an already difficult situation. Having not invested in the past in the development of nuclear power, like France, nor recently in renewables and storage systems like Spain, our country is very exposed to changes in the prices of fossil fuels, in particular natural gas.
The suspension of the Stability Pact
Again according to what was reported byHandlethe Government is apparently trying to resolve this problem by asking the European Union to suspend the Stability Pact, i.e. the set of debt rules that a state must respect to be part of the EU.
In reality, Italy is already in violation of all the main rules of this pact, but had started 2026 with the hope of returning to regularity for at least one, that of the deficit/GDP ratio of 3%. With the risk of recession, however, this prospect also seems unlikely.
If it obtained a suspension of the Stability Pact, the Government could accumulate public debt, running a large deficit (therefore spending more than it receives from taxes), to counteract the price increases and reduction in economic growth caused by the energy crisis.
