In July, Italy’s public debt reached €2.86 trillion (US$3.06 trillion), a €10.4 billion (US$11.13 billion) jump from June, the Bank of Italy reports.
The Treasury’s cash rose by €26.6 billion (US$28.46 billion), offsetting a €16.7 billion (US$17.87 billion) public fund surplus.
Central offices increased their debt by €11.3 billion (US$12.09 billion). Local offices reduced debt by €900 million (US$963 million).
Social welfare agencies kept debt almost unchanged. State taxes for July were €66 billion (US$70.62 billion), up 12.6% from last July.
From January to July, tax income hit €297.4 billion (US$318.21 billion), 7.5% higher than last year.
Background
Italy has struggled with high debt for years. Before COVID-19, the debt-to-GDP ratio was over 130%. The pandemic worsened it as Italy borrowed more to support the economy.
The EU keeps a close eye on Italy’s debt. EU rules recommend a debt-to-GDP ratio under 60%, a limit Italy often exceeds. Yet, the pandemic eased these rules temporarily.
Experts debate Italy’s rising debt. Some call for fiscal tightening, others advocate for growth-focused policies. All agree on the need for a long-term plan.
Italy isn’t alone. Spain, Greece, and Portugal also have high debt-to-GDP ratios. They argue that low interest rates make high debt sustainable. The ECB’s low rates support this view.
Italy’s economy leans on small and medium-sized businesses. These firms were hit hard by the pandemic. Public spending rose to help them, adding to the debt.
Tax collection in Italy has improved, but not enough to balance out the higher spending. The 7.5% increase in tax income from January to July is a positive sign.
In summary, Italy’s new debt record is part of a complex financial landscape. It includes both national and European economic policies. Balancing recovery with financial stability remains a challenge.