Italy has boosted its reported defense budget by €14 billion ($16.3 billion) this year by adjusting what it counts as military spending, but has not clarified the accounting changes behind the increase, according to one of the country’s top economists.
Carlo Cottarelli noted that Italy’s official figures show defense expenditure rising from roughly 1.5% of GDP in 2024 to 2% in 2025, yet the government has offered “no clear explanation” for the jump.
“Are we actually safer than we were last year? We simply don’t know,” said Cottarelli, a former IMF director and Italian senator who now teaches at the Catholic University of the Sacred Heart in Milan.
Rome committed in April to finally reaching the long-promised 2% NATO spending target, first agreed to in 2014 but never met. The pledge came shortly before June’s NATO summit, where allies agreed to push defense spending even higher—up to 3.5% of GDP by 2035, plus an additional 1.5% dedicated to defense-related infrastructure.
In October, the government released the delayed 2025 defense budget outlining how it intended to reach the 2% goal. The plan projected €31.3 billion in defense spending for the year, a 7.2% increase over 2024, but also revealed that several categories of expenditure were being newly classified as defense costs.
These additions—such as pension payments and other budgets being assigned “a more military focus,” as well as “military cooperation projects”—would raise the total to €45.3 billion on paper, enough to meet the 2% threshold.
In a report published last month, Cottarelli cited a parliamentary statement by Defense Minister Guido Crosetto explaining that the reclassification included spending by Italy’s tax police, the coast guard, and investments in space and cyber defense. Crosetto argued that Italy was simply following practices used by other NATO members.
However, Cottarelli said the level of detail provided was inadequate.
“It’s unclear from the minister’s remarks or from official documents what exactly has been reclassified,” he wrote. “Is this existing spending that has now been given a more military interpretation, or has the government newly determined that certain activities should count as defense? And which specific expenditures are involved?”
He told Defense News that no further clarification has been released since his report. Italy’s Ministry of Defense did not respond to requests for comment.
Despite the lack of transparency highlighted by Cottarelli, a NATO official told Defense News the alliance is satisfied with Italy’s categorization.
“Italy’s reported defense expenditures align with NATO’s definition and similar methods are used by other allies,” the official said. When asked for a detailed breakdown of the reclassified items, the official replied that such information must come from Italian authorities.
