Italy Warns Rising Debt Costs Could Pressure Economy

Italy’s borrowing costs are rising at an “alarming rate” amid geopolitical tensions, Economy Minister Giancarlo Giorgetti said on Friday as the government prepares to update its budget plans.

Giorgetti warned that prolonged wars in Ukraine and the Middle East could push inflation higher, arguing that current price pressures are being driven by supply disruptions rather than excessive demand.

Italy’s three year government bond yield reached 3.43% at an auction last week, its highest since June 2024, while the seven year yield rose to 3.98%, its highest since November 2023.

Italy expects public debt to peak at almost 139% of GDP this year, potentially making it the euro zone’s most indebted country.

The government plans to scrap road tax for 14.5 million vehicles from next year at a cost of €2.4 billion and use additional EU budget flexibility to help reduce energy costs.