Italy calls for EU support to meet NATO spending target

By Angelo Amante and Giuseppe Fonte

ROME, Nov 7 (Reuters) - Italy urged the European Union on Thursday to guarantee bond issuance needed to finance defence, saying a NATO spending target of at least 2% of gross domestic product (GDP) by 2028 clashed with the EU's revamped fiscal rules.

Donald Trump insisted during his first term as U.S. president that members of the North Atlantic Treaty Organization (NATO) hit the 2% goal. Now that he has won a second term, low defence spending is likely to become sensitive for Prime Minister Giorgia Meloni's administration in Italy.

Rome is unlikely to meet the requirement as it projects defence spending at 1.61% in 2027 amid 35 billion euros ($37.69 billion) already set aside through 2039, Economy Minister Giancarlo Giorgetti told a parliamentary hearing.

"The NATO target is very ambitious and not entirely consistent with the existing framework of European governance," he said.

During a separate hearing, Defence Minister Guido Crosetto told parliament mechanisms would probably have to be devised to allow special treatment for defence and avoid it weighing on national debt issuance.

Italy's public debt, the second largest in the euro zone after that of Greece, is targeted at 135.8% of GDP this year, up from 134.8 in 2023, and is seen rising to 137.8% in 2026 before marginally declining from 2027.

Crosetto, a senior member of Meloni's right-wing Brothers of Italy party, called for "a European cover and guarantee" to cut the amount of interest paid on any increased debt to support the NATO target, thereby avoiding any impact on social spending.

"That would give each state the opportunity to make defence spending neutral, absolutely neutral," he told a hearing in the Senate upper house.

Following Russia's full-scale 2022 invasion of Ukraine, NATO's European members came under pressure to boost their defence capabilities. The alliance said 23 out of the enlarged 32-strong group will reach 2% this year, but not Italy.

"Now everyone, first and foremost the U.S., France, Germany itself, is talking about 2.5%. We are far from 2% by 2028," Crosetto said.

($1 = 0.9287 euros) (Editing by Barbara Lewis and Mark Heinrich)