Italy’s President Says Need To Reduce Public Debt Is “Inescapable”

Italy’s President said there was an “inescapable need” to bring down the country’s mammoth public debt.

Perception Of Markets

At the same time, he warned that markets’ perception was a “questionable” indicator of the financial reliability of a nation.

Speaking via a video link at the Teha economic forum in Cernobbio, President Sergio Mattarella said that the cost of servicing Rome’s debt was far higher than neighbours due to interest rates.

Italy is an Honourable Debtor

“And yet Italy is an honourable debtor, with a 30-year history of annual primary government surpluses, with a public debt that has grown to a large extent, since 1992, mainly due to interest,” Mattarella said.

Italy’s public debt, the second largest in the euro zone as a proportion of output, is under close scrutiny by rating agencies and currently seen by the Treasury rising to nearly 140% of GDP through 2026.

What The Italian President Told The Teha Economic Forum

Mattarella told the forum that Italy’s debt amounted to nearly 2.9 trillion euros ($3.22 trillion) in 2023 and Rome paid slightly less in interest than Germany and France together.

“Mind you, mine is not an invitation to neglect debt: I am fully aware of the inescapable need to bring it down,” Mattarella said.

Italy, along with France and other countries under the EU’s  Excessive Deficit Procedure (EDP), will have to submit draft budgetary plans to the European Commission.

This is for the purpose of cut their deficit and debt levels, which markets are closely watching.

The procedure obliges Italy to cut its structural budget deficit – net of one-off factors and business cycle fluctuations – by 0.5% or 0.6% of GDP per year.

Italian Government’s Medium-Term Budget Plan

Sources recently told Reuters about the Italian government’s medium-term structural budget plan due for presentation this month.

Prime Minister Giorgia Meloni’s government is likely to stick to a commitment to bring its deficit-to-GDP ratio below the EU’s three per cent ceiling in 2026.

(With Inputs From Reuters)