Italy's low defence spending could cramp Meloni's style if Trump wins US vote

By Crispian Balmer and Angelo Amante

ROME (Reuters) - Italian Prime Minister Giorgia Meloni carefully courted Donald Trump when he was U.S. president and could be well-placed to serve as a bridge between Europe and Washington should he win back power in next month's election.

However, the relationship between the arch-conservative pair faces a problem: Italy's perennially low defence spending.

During his presidency, Trump insisted that NATO members meet a long-standing commitment to spend 2% of their GDP on defence. When he took office in 2017 just four of NATO's then 29 nations hit that target. 

This year, after two years of a war raging on its eastern borders in Ukraine, NATO predicts that 23 out of an enlarged 32-strong club will get there - but not Italy.

Meloni's government last month forecast that defence spending would come in at 1.49% of GDP this year, down from 1.5% in 2023, and would slip further to 1.44% in both 2025 and 2026.

Officials say they aim to hit 2% in 2028 and argue that spending is rising in real terms, with a marked uptick in the procurement of hardware. That is unlikely to impress Trump.

"I think Meloni will be a natural partner for Trump, and I think anyone coming into the Trump administration ... will want to partner with (Italy), but they have to realize, you're going to have to get to 2%," said Victoria Coates, a deputy national security adviser under Trump.

"Italy is the number three economy in the EU so, yes, they're going to need to get there," she told Reuters.

Meloni has forged good ties with President Joe Biden and has refused to comment on the U.S. election. Before becoming premier, she attended several conservative political gatherings where Trump was a speaker. 

A Trump confidante, who dealt with Italy during his time in office and requested anonymity to speak frankly, said officials in Meloni's administration have kept in contact with senior Trump foreign policy advisers in recent years, including Robert O'Brien, Trump's last national security adviser. 

However, the source told Reuters that Italy's defense budget plans meant Rome would likely hit snags if it tried to ingratiate itself with a victorious Republican administration. 

The Trump campaign and Meloni's government did not respond to requests for comment for this story. O'Brien also did not respond.

An Italian official, who asked not to be identified, said the government was well aware that the United States wanted Italy to ramp up defence spending, but said budgetary restrictions made it impossible to do so in the near term. 

He expressed hoped that any Trump administration would understand this and acknowledged that Rome could not renege on a revised pledge to reach the NATO grade in 2028 rather than 2024, as previously promised.

There are many reasons for Italy's sluggish spending record.

At the top of the list is the poor state of public finances, with debt expected to hit 135.8% of GDP this year, the highest ratio in Europe after Greece, severely limiting budget options.

Another brake is deep-rooted hostility to hiking military funding in a largely Roman Catholic country that has taken to heart Pope Francis's repeated anti-war exhortations. 

Underscoring that point, a poll released by the European Council on Foreign Relations in July showed 63% of Italians opposed raising defence spending, eight points more than any of the other 14 EU nations surveyed. 

Russia's 2022 invasion of Ukraine jolted much of Europe out its post-Cold War complacency and 17 NATO members have pushed spending to or above the 2% level since then, including Poland which has almost doubled its military budget to more than 4%. 

Italian politicians have faced no pressure to do likewise.

MILITARY STRENGTH   

Elisabetta Trenta, Italy's defence minister between 2018-19, attended a fiery NATO meeting with Trump in July 2018 when he said countries should be targeting 4% not 2%.

"I burst out laughing," she told Reuters. "Spending 4% of GDP on the military cannot be done. It isn't even thinkable. It is already incredibly difficult to get to 2%, even though we have agreed to that."

Despite the restraints, Italian officials say they have nonetheless succeeded in lifting spending on equipment to 22.1% of the total defence budget this year from barely 10% a decade ago, exceeding NATO's 20% guideline. Given Italy is a relatively wealthy country, this means it boasts a robust military.

As an example, officials point out it provides more troops to EU, U.N. and NATO missions than any other developed nation.         

It also operates one of only three carrier strike groups in Europe, alongside Britain and France, and has a powerful air force, with the largest number of advanced F35s on order in continental Europe, while simultaneously investing in a next-generation fighter programme with Britain and Japan.

"The air force and navy are really on par with the British and the French, and ahead of Germany," said Alessandro Marrone, head of the defence programme at Rome's Istituto Affari Internazionali think-tank.

"The problem is largely the army. It has been under-resourced, under-staffed, under-equipped," he told Reuters.

Admiral Giuseppe Cavo Dragone, defence chief of staff until this month, has said shortages afflict all the services, warning that a 2012 reform was undermining the military.

The reform called for staffing to be cut to 150,000 from 180,000 within a decade. Officers resisted and the current number is around 165,000 -- but this is far too few in a world that looks very different from 2012, Dragone said. 

"The 2012 law is obsolete, brutally obsolete," Dragone told parliament in May. "Times have changed; threats have changed. Our commitments (today) are much, much more massive." 

INDUSTRY URGES CAUTION

Italy's Defence Minister Guido Crosetto, a close ally of Meloni, has forcefully backed calls to expand, rather than contract the army. He has also pushed hard for an increase in procurement contracts, including announcing last month the purchase of 24 new eurofighters and 25 further F35s.

"In many ways this is a golden moment for our industry because we have a minister who understands the defence sector," said a senior executive in an Italian defence company.

According to the Stockholm International Peace Research Institute, Italy was the sixth-biggest global exporter of arms between 2019-23. Companies such Leonardo and Fincantieri would be well positioned to cash in if Rome lifts spending post 2026 -- as it has promised.

The defence executive said this timeframe suited local firms, explaining that any immediate expansion of spending would benefit U.S. defence giants who are better placed right now to absorb large contracts.

A greater lead time would allow Italian firms to prepare the ground, including with recently launched joint-ventures, such as Leonardo's tie-up with German peer Rheinmetall to produce tanks and other land defence systems.

Elisabetta Trenta said such cooperation at an industry and state level was vital to leverage European defence and lay aside national ambitions that dissipated resources.

"It is not a question of what Trump wants. We need to conceive a real European defence," she said. 

"We need to be much more concerned about Italy's investment programs being coordinated with those of France, with those of Germany and Spain so that they can be put together and really create a great support ... for NATO," she said.

(Additional reporting by Giulia Segreti in Rome and Gram Slattery in Washington; Editing by Daniel Flynn)