Italy's debt is sensitive to shocks
and there are medium-term risks in this area, the European
Commission said Wednesday.
For Italy, it said, "overall, the debt sustainability analysis
points to high risks in the medium term.
According to the baseline 10-year projections, the debt-to-GDP
ratio increases steadily to around 168% of GDP in 2034, said the
Commission.
"The debt trajectory is sensitive to macroeconomic shocks.
"According to stochastic projections, which simulate a wide
range of possible temporary shocks to macroeconomic variables,
there is a high probability that the debt ratio will be higher
in 2028 than in 2023."
European Economic Affairs Commissioner Paolo Gentiloni said in
delivering the report that Italy's biggest challenge was
prudence on its accounts and National Recovery and Resilience
Plan (NRRP) investments, and stressed that in Italy, cautious
spending is a must but not a return to austerity.
"For Italy, the game is played on two fronts, on the one hand
prudent budgetary policies, which are indispensable" with this
debt and deficit, "on the other to continue with public
investment", said Gentiloni in a video message sent to the
presentation of the annual report of the Parliamentary Budget
Office.
"The new EU rules will help to achieve a better balance between
these objectives and for Italy they are better than the existing
ones," he added.
Gentiloni went on: "We must not confuse cautious spending with
austerity.
"Caution in spending is necessary in countries with high debt
and very high deficits.
"Italy has a deficit above 7 per cent and debt above 135 per
cent, so caution is a must and I think the Italian government is
aware of that.
"At the same time, Italy has an unprecedented amount of possible
investment firepower' with the NRRP.
It would be a 'paradox' to struggle to 'ground the huge
resources' of the EU.
"We need on the one hand cautious spending and on the other
hand to multiply the efforts for NRRP investments".
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