Italian Prime Minister Giorgia Meloni has issued a stark ultimatum to Brussels: either scrap the system of annual budget rebates enjoyed by a handful of member states, or Italy will demand the same privilege for itself. The warning, delivered to the Italian Parliament on Thursday, sets the stage for what promises to be a fraught round of negotiations on the European Union's next Multiannual Financial Framework (MFF), the bloc's seven-year budget.
Meloni described the rebates—discounts on national contributions currently granted to Germany, the Netherlands, Sweden, Denmark, and Austria—as "anachronistic" and insisted they must be eliminated. "If the system is not abolished, Italy will ask to enjoy the same privilege," she told the Chamber of Deputies. Rome is the EU's third-largest net contributor, and Meloni argued that the current arrangement is unfair to countries that pay in more than they receive.
Italy's Three Red Lines
In her address, Meloni laid out three non-negotiable demands for the Italian government. First, the budget must strike a balance between contributions and returns: Italy will not accept a deal that increases its payments to Brussels while reducing the resources available at home. Second, the rebate system must go. Third, funding for new priorities—such as competitiveness and defence—must not come at the expense of traditional policies like the Common Agricultural Policy (CAP), fisheries, and cohesion funds. Instead, Meloni proposed cutting EU administrative spending, which the European Commission has suggested increasing by more than 20 percent.
"Those who want to finance new priorities by cutting traditional policies will have to look elsewhere," Meloni said. "We are ready to invest in competitiveness and defence, but this cannot be done at the expense of CAP, fisheries or cohesion."
Brussels Negotiations and Alliances
The battle over the MFF pits two main blocs against each other. On one side are the "frugal" countries—led by Germany and the Netherlands, with Sweden, Denmark, and Austria—who benefit from multi-billion-euro rebates and oppose a larger budget due to pressure on their national finances. They are pushing for linear, across-the-board cuts. On the other side, Italy is aligned with the informal "Friends of Cohesion" group, a coalition of 16 member states including Poland, Spain, and Portugal, which opposes cuts to regional spending and demands the abolition of rebates.
European diplomats expect the Commission's upcoming draft to include modest, generalised cuts rather than the horizontal reductions demanded by the net contributors. Tensions over rebates are not new: in December, Rome threatened to block European Council conclusions if the mechanism—which had resurfaced in a negotiating text from the Danish presidency—was not removed. Meloni also made clear that Italy will not be bound by artificial deadlines and will only sign off once the best possible compromise is reached.
Economic Security and the Mattei Plan
Beyond the budget, Meloni addressed economic security, framing it as integral to national and European security. She highlighted the importance of the new EU system for screening foreign investments, which allows member states to assess operations that could affect security or create strategic dependencies. Thanks to Italy's efforts, the final decision on such investments will remain with individual member states.
To tackle geopolitical challenges linked to economic dependencies—particularly in critical raw materials, rare earths, and fertilisers—Meloni outlined a strategy of diversifying supplies, expanding EU trade agreements, and strengthening industrial value chains with close partners. This is where the Mattei Plan, Italy's initiative for long-term, mutually beneficial partnerships with African and other countries, comes into play.
On the negotiating front, the Italian government claims progress has already been made. Member states may gain the option to increase CAP funding, stronger guarantees for regions, greater protection for small and medium-sized enterprises in the Competitiveness Fund, and recognition of technological neutrality in industrial decarbonisation. To finance new priorities, Italy is open to considering some "own resources" proposals from the European Parliament, such as taxing cryptocurrency profits or introducing a European digital tax. However, Meloni drew a clear red line: any increase in EU budget revenues must not be passed on to businesses, citizens, or national public finances.
The coming weeks will test whether Meloni's tough stance can reshape the EU's fiscal architecture—or whether Italy will end up joining the rebate club it so fiercely criticises. For now, Rome is betting that its leverage as a major net contributor and its alliance with the Friends of Cohesion will force a change. The outcome will have lasting implications for how Europe funds its priorities and balances the interests of its 27 member states.
