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Relevant factors influencing Public Debt Developments in Italy

Relevant factors influencing Public Debt Developments in Italy

Italy’s public finances continued to improve in 2017, as the general government deficit declined to 1.9 percent of GDP (excluding banking sector support measures), from 2.5 percent in 2016. The deficit is projected to further decline to 1.6 percent of GDP this year and, under existing legislation, to 0.8 percent in 2019 and zero in 2020, turning into a 0.2 percent-of-GDP surplus in 2021.

  • According to the latest data from the statistical office (ISTAT), the budgetary impact of government interventions in the banking system that were carried out in 2017 (recapitalization of Banca Monte dei Paschi di Siena and mandatory liquidation of Veneto Banca and Banca Popolare di Vicenza) was 0.4 percent of GDP (which led to the 2017 headline deficit being revised up to 2.3 percent in the final release), while the overall impact on gross public debt is just under 1.0 percent of GDP.
  • However, it must be emphasized that: a) the interventions were a one-off event; b) the actual cash disbursement was equivalent to 0.6 percent of GDP in total; c) the deficit impact estimated by the statistical authorities consists of unrealised losses; d) the debt increase over and above the cash disbursement reflects government guarantees provided in the winding up of the two Veneto banks, i.e. contingent liabilities […]