Economy

Italy’s President Declares the Need to Reduce Public Debt as “Inescapable”

ROME (Reuters) – Italy’s president emphasized the urgent necessity of reducing the country’s substantial public debt but cautioned that the market’s perception may not be a reliable measure of a nation’s financial health.

Speaking through a video link at the Teha economic forum in Cernobbio, President Sergio Mattarella highlighted that Italy’s cost of servicing its debt is significantly higher than that of its neighbors, primarily due to interest rates.

“Yet Italy is an honourable debtor, with a 30-year history of annual primary government surpluses. Our public debt has escalated significantly since 1992, largely due to interest,” stated Mattarella.

Italy’s public debt, the second highest in the euro zone relative to its economic output, is closely monitored by rating agencies and is projected by the Treasury to reach nearly 140% of GDP by 2026.

Mattarella noted that in 2023, Italy’s debt was nearly 2.9 trillion euros, and the country paid slightly less in interest than Germany and France combined.

“Let me clarify, this is not an invitation to overlook debt: I recognize the pressing need to reduce it,” he remarked.

Alongside France and other countries under the EU’s Excessive Deficit Procedure (EDP), Italy must submit draft budget plans to the European Commission aimed at reducing their deficit and debt levels, which are being closely scrutinized by the markets.

This procedure requires Italy to decrease its structural budget deficit—adjusted for one-off factors and economic fluctuations—by 0.5% to 0.6% of GDP each year.

Sources indicated last week that in its upcoming medium-term structural budget plan, Prime Minister Giorgia Meloni’s government intends to adhere to its commitment to lower the deficit-to-GDP ratio beneath the EU’s 3% threshold by 2026.

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