Italy will carry out a major armed forces reform, with the ambitious goal of increasing or at least maintaining its operational capabilities while cutting personnel, infrastructure and support components. This is what Defense Minister Giampaolo di Paola wants to achieve through a special law, expected to be approved by parliament before winter, followed by a number of decrees.

But di Paola is not waiting for legislators and is already pushing forward, according to an updated 2012 defense budget released in July, which includes a new approach to allocate resources to the various modernization programs. The government is adamant that additional funding provided earlier on top of the core defense budget to finance military operations abroad is going to be slashed. The provision for 2012 is set at €1 billion ($1.23 billion), with a 30% reduction from previous levels. This will require the ministry to gradually reduce force commitments; for instance, the provision for deployed troops, including in Afghanistan, for 2012 has now been cut to 6,600 from 7,400. The idea is to trim the Afghanistan force gradually by 1,200, to 3,000, by March 2013.

But it also means that, hopefully for Rome, the Afghan mission will change from counterinsurgency to training and supporting local forces sooner, rather than later. Several small operations will have to be wrapped up, regardless.

Hope is part of the strategy elsewhere, too. Given the crisis in Syria, it will be difficult to reduce the contribution to U.N. missions, and so far NATO's attempts to bring back troops from Kosovo have been frozen, due to the tense situation in the country following ethnic clashes in 2011.

Still, by the end of the year Italy will probably have no more than 6,000 troops deployed there, and the money granted by the treasury will allow for proper training, equipping and meeting some urgent operational requirements without touching the core budget.

Di Paola further plans to reduce the uniformed personnel from 180,000 to no more than 150,000, with civil servants going down to 20,000 as soon as possible. New laws recently approved or being approved will allow transfers to other government branches, if possible, as well as a reduction of the officer corps and non-commissioned cadre.

Meantime, logistics and support infrastructure is being shut down, with preference given to building joint-service facilities and centralized procurement systems, which are expected to save money.

The operations account is being spared because defense officials say it already is skeletal. The minister says that the current €1.5 billion is below the minimum required to keep the armed forces operational. At this level, it is possible only to keep forces prepared for overseas deployment or for key national defense duties at readiness, and little more.

That leaves procurement as a major bill-payer. The ministry has requested €3.9 billion versus the €3.4 billion approved in 2011, but there is just €2.47 billion available for 2012 (with another €1.3 billion or so provided by the ministries of economic development, research and universities, bringing the total to €3.8 billion). This forces defense to make extraordinary maneuvers to maintain coherence in its program financing while postponing deliveries and payments, delaying new program starts and renegotiating contractual terms and quantities in every case it was legally and financially able to do so. The latter exercise is continuing, but the minister warns that in many cases canceling or reducing quantities will result in litigation and the prospect of heavy penalties.

New contracts will be written differently, but this will influence only the future. Di Paola says procurement quantities will be specified over only a set number of years. He referred to a process of gradually improved systems versus “umbrella” contracts for fixed quantities, with deliveries spread over decades and additional spending to prevent system obsolescence.

Nevertheless, the ministry hopes that 2012 will be the worst year, and that in 2013 and 2014 the total procurement funding, including “external” money will rise back to the pre-crisis level of €5 billion—a dim hope, given the seriousness of the Italian financial crisis.

For now, the ministry has avoided making any major decisions in terms of program termination or cancellation. But several programs are under scrutiny and if contracts will allow cuts—or even walking away—the ministry is expected to exploit the opportunity soon. Officials stress that scarce procurement money will be allocated only to high-priority and high-operational payoff programs, with all the rest reduced or possibly scrapped.