Italy’s Public Debt: 29% Held by Foreign Investors

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Understanding Public Debt: An Evolving Landscape

Public debt—two words that conjure complex scenarios—are frequently discussed in the context of spending, growth, and investments.
Recently, as the government prepares to unveil its upcoming structural budget plan, Minister of Economy and Finance Giancarlo Giorgetti indicated a strong intent to “not contribute to the burden of public debt for future generations.”

As of mid-2024, Italy’s public debt has risen to over €2.947 trillion, marking an increase of approximately €100 billion compared to the previous year.
Notably, Italy possesses the second-highest public debt ratio in Europe, with a recent Istat review revealing a staggering 134.6% of GDP in 2023.

The Mechanics of Public Debt

Public debt is incurred by the state to meet its financial requirements, which translates to liabilities owed to various creditors.
These include central banks, financial institutions, and private investors, both domestic and international.
The Bank of Italy meticulously tracks the holders of this public debt, releasing monthly reports.
As of June 2024, 29.2% of Italy’s public debt is held by non-residents—foreign institutional investors and other entities.

The Bank of Italy itself owns 23.1% of this debt, while central banks and commercial banks hold 21.8%.
Furthermore, about 11.5% of the debt is owned by financial institutions, and the remaining 14.5% by local residents—mainly families and Italian investors.

Shifting Trends in Debt Ownership

Historical data suggest a decline in the proportion of public debt held by the Bank of Italy, which peaked at over 25% two years ago.
In contrast, the share owned by both foreign investors and Italian families has seen a notable increase.
The proportion of debt held by residents surged from just 8.5% in 2022 to nearly 15% today.
Concurrently, foreign holdings also rose from 27.6% in June 2022 to 29.2% in June 2024.

Implications of These Changes

The increase in foreign-held debt may reflect growing interest in Italian treasury bonds on international markets, which can be viewed positively.
Meanwhile, the rise in domestic holdings, partially attributed to the successful sales of BTP Valore bonds, suggests strengthened local investor confidence.
A significant domestic ownership of public debt can mitigate reliance on external factors and generally fosters stability.

However, an influx of foreign investment indicates strong attraction to Italian treasury bonds.
This increased exposure can also make the country vulnerable to external economic fluctuations.
According to Eurostat, Italy has one of the lowest percentages of public debt held by foreign investors in the Eurozone, surpassed only by Malta (less than 22%), and significantly lower than Germany and France, whose foreign-held debt ratios stand at 45% and 50%, respectively.

For more insights, read also: In the last decade, 150,000 VAT numbers have disappeared.

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