Italy’s borrowing costs have jumped sharply, while public debt is projected to touch nearly 139 per cent of GDP this year as geopolitical tensions add pressure to the economy.
Italy’s public debt burden is rising at an “alarming rate” as geopolitical tensions push up the cost of servicing government debt, Economy Minister Giancarlo Giorgetti said on Friday.
Speaking at a conference in Portofino, Giorgetti warned that continued wars in Ukraine and the Middle East would inevitably fuel inflation, adding to pressure on households and the broader economy.
Italy has also seen a sharp rise in borrowing costs. At an auction last week, the yield on three-year BTP bonds climbed to 3.43 per cent, its highest level since June 2024, while the seven-year BTP yield reached 3.98 per cent, the highest since November 2023.
Under its latest budget plan, Italy expects public debt to peak at almost 139 per cent of GDP this year. That would make Italy the euro zone’s most indebted country, overtaking Greece.
Giorgetti also argued that further interest-rate increases by central banks in Europe and the United States may not be enough to contain inflation. According to the minister, the current inflationary pressure is being driven by a supply shock rather than an overheated economy.
More from Business“Inflation stems from a supply shock,” Giorgetti said, arguing that tighter monetary policy aimed at cooling demand would not directly address the underlying problem.
Meanwhile, the Italian government is taking steps to cushion the impact on households. It plans to scrap road tax from next year for 14.5 million cars and motorcycles, at an estimated cost of €2.4 billion ($2.75 billion). The measure comes on top of €2.8 billion allocated this year for temporary excise-duty cuts.
Rome also plans to use additional fiscal room provided under the European Union’s National Escape Clause to help reduce energy costs. The flexibility is worth around 0.6 per cent of GDP, or approximately €14 billion through 2028.
Giorgetti said he expected the European Commission to be open to granting Italy the additional budgetary flexibility. He also reiterated hopes that revised data on Italy’s 2025 deficit, due next week, could bring the figure below the EU’s 3 per cent of GDP ceiling and pave the way for an earlier exit from the bloc’s disciplinary procedure.
