Italy on the right track despite record-breaking public debt, says OECD expert

Italy’s record public debt – one of the highest debt-to-GDP ratios in the world – is not a cause for concern as the country is still on the right track, the OECD’s Director for Financial and Enterprise Affairs, Carmine di Noia, told Euractiv in an interview.

Speaking after the presentation of the OECD’s first report on global debt on Thursday, Di Noia discussed the need for a more comprehensive approach to discussing public debt.

“Italy’s public debt is not uniquely problematic compared to other countries,” he said while pointing to the importance of considering individual countries with high debt levels while at the same time recognising the interconnected nature of global markets.

Italy currently holds the second-highest public debt-to-GDP ratio among eurozone countries after Greece at around 140%, while at the same time facing significant economic vulnerabilities, mainly due to high public debt and sluggish economic growth.

Despite these challenges, Di Noia expressed confidence that Italy was on the right track and commended it for its unique approach.

“Italy is a country that sells a lot of retail debt instruments to its citizens compared to others. It’s a very interesting and positive aspect that diversifies the investor base. The treasury, which manages public debt, is very competent because they use a platform where citizens can directly purchase government bonds,” he said.

“Bond markets are global in nature, and no single bond market can be assessed entirely in isolation. The debt should be considered globally, both public and private,” he continued.

The OECD’s Global Debt Report highlights a significant increase in sovereign and corporate bond debt since 2008, reaching almost $100 trillion, a figure comparable to global GDP.

Di Noia explained that favourable funding conditions between 2008 and 2022 allowed many governments and companies to borrow cheaply.

However, he warned that some 40% of global government bonds and 37% of corporate bonds will mature by 2026, requiring additional borrowing at higher rates.

Governments are expected to face challenges in finding buyers for their debt as major sources of demand are withdrawn.

Many central banks are now withdrawing from government bond markets, where they have become major holders since the global financial crisis.

Even if inflation is brought down to central bank targets, yields will likely remain higher than when much of the debt was originally issued.

This poses a further challenge for countries like Italy in managing their debt in the evolving global economic landscape.

(Alessia Peretti | Euractiv.it)