Italian Public Debt: from constraint to aid for businesses and consumers

The issue of Italy’s public debt has long been one of the most hotly debated topics at the political level, as well as one of our country’s main problems within the international economic landscape.

Public debt is the debt incurred by a state to meet its needs through public services and investments: there is a deficit when revenue is less than the sum of expenditure and interest expenses. 

Historical Excursus

Historically, Italy – ever since its unification – has accumulated ever-increasing deficits that have contributed to the creation of a gigantic stock of public debt that remained almost constant in double digits until, at the end of the 1980s, it exceeded the 100 per cent threshold.  

With the Maastricht Treaty of 1992 – and the arrival of the single currency – and thanks also to the reforms enacted by successive Italian governments, there was a slow decline in it until the crisis of 2008, when it started to grow again. With the sovereign debt crisis of 2011-2012, it stabilised at around 134 -135%, a level maintained until the Covid-19 pandemic.

Coronavirus emergency, Ukrainian conflict and energy crisis 

The coronavirus emergency has outlined a critical situation not only from a health point of view, but also from an economic and social one.

According to Eurostat data, a large number of European States, in order to cope with the pandemic crisis, found it necessary to resort to massive debt (Germany 69.3%, Italy 150.8%, France 113.3%, Austria 82.8%, Spain 118.4%) to cover the shortfall in income, in order to sustain the economy and prevent the emergency situation from having serious consequences in the social sphere. 

In Italy, too, the need immediately emerged to offer support policies to businesses – which needed effective and consistent support to ensure their resilience during the emergency period and subsequently favour their relaunch – and a series of measures in favour of families. 

The period of strong economic instability, caused first by the Covid 19 pandemic, then by the war in Ukraine and the ensuing energy crisis, also had a strong impact on our country, where the public debt set a new record. According to the Bank of Italy, in March 2022 it reached 2,755.4 billion, representing 147% of GDP.  

To understand the relationship between the public debt as a percentage of GDP and the impact of debt on economic growth, we met with Leila Chentouf, Program Director del Global Master in International Management at Rome Business School and co-author of the research “Public debt in Italy: which post-pandemic scenarios?” who told us:

Italy’s debt in Europe is second only to Greece, but this figure, which might seem alarming, when read in the international context does not take on serious significance. For example, Japan has a debt-to-GDP ratio of around 250%.

In order to address this issue, it is therefore necessary to carry out a thorough analysis and not be influenced only by figures when discussing the sustainability of public debt and the parameters to be used to assess it.

First of all, in order to consider possible fragilities or weaknesses of a country, it is important to know who holds its debt: in fact, it tends to be risky for it to be at the disposal of foreign operators (foreign creditors). In Italy, 30% of public debt, which rises to 56% in France, is in the hands of foreign players operating on the international market: this parameter must be strongly monitored because speculation risks could arise from it, to counteract which institutional support is necessary. Precisely in order to deal with this eventuality, the European Central Bank has proposed a new anti-spread shield, the TPI (Transmission Protection Instrument), which will help to dispel concerns and also help our spread to be more stable. The spread is considered a kind of barometer of international investor confidence in the country. If it is low, it means that the markets believe the country is on the right track. On the other hand, if it rises, so does concern.”

Public Debt, Businesses and Citizens

According to Eurostat, the cumulative debt of 19 Eurozone countries in 2020-2022 reached 98% of GDP. 

Against a classic theoretical framework according to which a high level of debt/GDP would jeopardise the economic stability of a nation and its economic growth, there are opinions that contradict this assumption because, it is argued, there is no economic theory that allows one to predict in the abstract what the debt/GDP ratio is that can lead a country to default, since there is no ‘definable’ value for all situations.

In fact, according to eminent economists in times of crisis, public debt, in the face of structural reforms, can help the economy to recover, representing a driving force.

When a country like Italy is in a difficult situation, public authorities can use debt to help businesses to grow and citizens and families to live more serenely. Of course, structural reforms and a concrete investment plan must be put in place, from the education system to public health, from research to technological innovation to modernise the country and make it more competitive in international markets. 

This has happened in France, Germany and Portugal where governments have intervened with robust aid. In emergency situations, there are two instruments to intervene, now more than ever with a war conflict in progress: an emergency policy and long-term measures. Emergency policies currently have the purpose, for example, of helping companies to maintain the production process and citizens to pay their gas and electricity bills, the increase of which stems from the energy crisis as a consequence of the conflict in Ukraine. Long-term measures are needed to have a vision of the future: it is enough to talk about today or tomorrow, we have to talk about 2030, 2040, 2050 to know what Italy, Europe and the world will be like in 2050. Public debt can, therefore, be a solution. We just need to know how to use it. 

Moreover, the problem today is not only the public debt of states but the International Monetary Fund’s cut in growth estimates for the global economy. In the ‘World Economic Outlook’ report, the global economy is expected to grow by 2.7 per cent in 2023, down from 3.2 per cent in 2022, which would represent the weakest performance in two decades, with the exception of the 2008 financial crisis and the 2020 pandemic.

The International Panorama

According to Eurostat, the countries with the highest public debt are Greece (189.3%), Italy (147%), Portugal (127%), Spain (117%), and France (114.45).

In 2021, Italy was sixth in the world ranking of the most indebted nations in the world. First was Japan (250%), followed by Sudan (210), Greece (207), Eritrea (175) and Cape Verde (161% of GDP). 


The National Recovery and Resilience Plan, included within the Next Generation EU (NGEU) programme and agreed by the European Union in response to the Covid 19 pandemic crisis, stands as a great opportunity for growth and improvement in the international competitiveness of the Country System in all the sectors involved in the Plan. 

The relaunch of Italy outlined by the PNRR is developed around six missions: digitalisation, innovation, competitiveness and tourism, ecological transition, infrastructure for sustainable mobility, education, and health. 

 “The substantial resources allocated to Italy will be able to really change the country’s future. The 6 missions identified in the Plan were very important at the time of the pandemic and are even more important now with the conflict in Ukraine. In the knowledge economy, digitisation plays a decisive role, because everyone’s future will be digital.  It will also be crucial to invest in a sustainable economy and to implement actions that lead us towards an ecological transition and an energy revolution with a diversification of sources: from wind power to photovoltaics, to 100% green energy. But we must also bring about a cultural revolution in citizens who must adopt more rational and conscious behaviour in energy consumption. 

We must also not forget education and training, long life learning to make the younger generations ready for the increasingly dynamic world of work.”

2023 Forecast for the Italian economy

According to the latest Report of the Centro Studi di Confindustria presented on 8 October, the 2023 scenario for Italy could be characterised by a phase of inflation-linked stagnation if a cap on gas prices is not imposed.   

The International Monetary Fund has spoken of a probability of recession. The latest publication of the Bank of Italy forecast growth for Italy in 2023 at 1.6 per cent compared to a forecast of 2.5.  

With these assumptions, we will not be in recession, moreover, the European Central Bank and the European Commission have planned support measures. Important signals and a strong warning against the risks of speculation.”


Leila Chentouf holds a PhD in economics from the University of Paris X Nanterre and a master’s degree in international economics and finance from the University of Paris X Nanterre – France. She is an expert on international cooperation with MENA countries and has extensive experience working with and for the European Commission. She teaches Economics at various universities and business schools.  At the Rome Business School she teaches International Economics and at the Swiss School of Management she teaches the MBA modules ‘Competitive Strategy’ and ‘Globalisation’. She is also a tutor for the Doctor of Business Administration and Doctor of Philosophy programmes at SSM.Leila Chentouf is also a committed researcher. Her latest project is dedicated to the sustainable development of the Mediterranean, with the aim of designing green economic growth to overcome the current and future crisis.

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