Mario Draghi
Photographer: Alessia Pierdomenico / Bloomberg
Photographer: Alessia Pierdomenico / Bloomberg
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Italy’s debt this year will exceed the country’s previous record built in the aftermath of World War I, exposing the grueling costs of the coronavirus pandemic to the eurozonethe third largest economy.
The new loan amount of 159.8% of gross domestic product emerged in a tax outlook ratified by Prime Minister Mario Draghi’s cabinet on Thursday. That surpasses the likely record level of 159.5% reached in 1920, shortly before the era of Benito Mussolini’s fascist dictatorship.
Record charge
Italian debt is set to rise to its highest level ever
Source: Bloomberg News and Government Plan
The economic update also confirms a lower growth forecast of 4.1% this year, with a target of 4.5% once stimulus and other measures are included, a government official said. It expects a budget deficit of 11.8%, boosting borrowing by an additional billions of euros to protect citizens and businesses from the effects of the pandemic.
The numbers represent the first full set of economic forecasts made since Draghi took the helm of Italy’s response to the coronavirus, which killed more than 115,000 people and led to lockdowns that have eroded key sectors such as tourism. The government has agreed to lend € 40 billion ($ 48 billion) for new stimulus measures, bringing total pandemic spending to more than € 170 billion so far.
Read more: Draghi rushes through plans to borrow Until $ 48 billion More
For now, Italy’s spending is supported by the European Central Bank, which is buying up government bonds to control spreads between countries and make pandemic-era debt significantly cheaper to pay off.
With austerity pushed way down so that the government can focus on rebuilding the economy, the recovery in growth fueled by national and European stimulus measures should help aid Italy’s finances starting next year.
The deficit is projected to decline to 5.9% of GDP, while the debt is projected to shrink to 156.3% of output by 2022. According to a draft by Bloomberg, the government does not plan to reduce the deficit below 3% of production by 2025. Debt is expected to return to pre-crisis levels of 134.6% by the end of the decade.
In recent days, restaurateurs and other business owners have clashed with police in Rome amid protests calling for a relaxation of lockdown conditions and more economic support. Elsewhere, protesters have blocked highways as they campaign for a faster reopening of the country.
The government has indicated that it may start relaxing some measures as early as later this month, giving priority to outdoor activities.
Vaccination Push
Draghi has increased pressure on regional governments to speed up their vaccination coverage, particularly by focusing on older citizens. But his government is struggling to hit a target of 500,000 shots a day by the end of the month.
In line with other EU countries, Italy is blocking vaccine doses produced by Johnson & Johnson and has had to deal with cancellations by people who were scheduled to use it Astra Zeneca Plc shot amid reports of rare cases of blood clots.
Health Minister Roberto Speranza told lawmakers that the AstraZeneca vaccine is efficient and safe, like all other vaccines currently in use in Europe. Commenting on the Johnson & Johnson vaccine review, he said, “Our hope is that there may soon be clarity so that we can start using a vaccine that will be important for our campaign. “
– With the assistance of John Follain, Giovanni Salzano and Zoe Schneeweiss
Updates with end-of-decade outlook in the seventh paragraph