Italian Debt Is Surging. But Investors Are Playing It Cool
Italy already had a weak economy and the biggest government debt in Europe when the COVID-19 crisis started, and these circumstances have worsened dramatically as a result of Italy’s fight with the deadly virus. Italy’s government debt is projected to swell as money is spent on relief efforts. However, bond investors have been relying on the fact that the European Central Bank will help to lift the country from economic despair.
The European Commission, however, has stated that it believes Italy may endure one of Europe’s most severe downturns and shrink by almost 10%. Rome has promised $90 billion in direct spending to cushion the effects of COVID-19 on struggling Italian families. However, this spending budget will push the country’s debt pile to its highest even, piling on 159% of GDP in 2020.