MNI BRIEF: Italy Debt Reduction Risk If Spread Widens 100bps

Rome's debt reduction trend plan to reduce the debt-to-gdp ratio from 142% this year to 140.4% in 2026 would be at risk if the spread of BTPs over German Bunds widened by 100 basis points, Bank of Italy’s head of Economics and Statistics, Sergio Nicoletti Altimari, told an Italian parliament committee on Thursday.

“The decreasing dynamics of the ratio would stop, reverse, as soon as 2025” in the event of the 100bps increase on the spread, he said, considering the modest planned improvements of the wider Italian public finances.

Italy's growth will likely be better than initially expected, returning to positive numbers in Q1 this year, but the risks are still tilted to the downside due to the unpredictable outcomes from the war in Ukraine and also the deteriorating conditions on credit due to “higher risk aversion associated with instability in the international banking sector,”