- Italy's Meloni government approved an extra 28 billion euros in borrowing over two years for defense and energy spending on Oct. 2.
- The 2027 deficit target rose to 3.4% of GDP and the 2028 target to 3.2%, up from April projections of 2.8% and 2.5%.
- Goldman Sachs says wider deficits and higher yields put Italy's debt-to-GDP ratio on an upward path until 2028, stabilizing near 137%, the highest in Europe.
- Goldman estimates a structural shift to 10-year yields above 4% would keep Italy's debt ratio on an increasing path.
- The 10-year Italian BTP yield was 4.55% and the Bund-BTP spread about 108 basis points, while the French 10-year OAT yield was 4.85%.
- Italy's general election is due no later than December 22, 2027, and Goldman expects close-race politics to leave little room for fiscal consolidation.
- PIMCO notes Italian sovereign debt is mainly held domestically, which it views as a stabilizing factor relative to France.
Quotes
“significant upward surprise”
“Looser fiscal policy, tighter financial conditions and a close electoral race appear poised to weaken the debt outlook after four years of fiscal consolidation”
“a stabilizing factor”