Policy Article

Italy: Debt sustainability by more growth? (in German)

Kiel Policy Briefs, 120

The authors show that despite its high debt-to-GDP ratio and increasing risk premia on government bonds, Italy’s public debt remains sustainable for now. In the medium run, debt sustainability could, however, become an issue as negative growth outlooks or outright shocks further limit the already strained fiscal policy. Against this backdrop, the authors reveal that Italy has been growing more slowly than the EU average since the 1990s, as not only the poorer regions in the south are weakening, but also the "rich North" has lost its role as growth engine. According to the authors, Italy's chronic growth problems can not be remedied by state consumption, but only by structural reforms that make Italy more attractive to private investors again.