For decades, Greece has been the European symbol of out-of-control public debt. By 2020 its debt-to-GDP ratio had exceeded 210%. Today those figures must be looked at from a different point of view. In fact, in 2026, Italy will be the Eurozone country with the highest debt/GDP ratio, overtaking Greece for the first time.
According to the Public Finance Document, Italian debt will rise to 138.6% of GDP this year, while Greek debt will fall to 136.8%. Estimates from the International Monetary Fund confirm the same scenario.
At the end of 2025, Italian public debt has already reached the historic annual record of 3,095 billion euros, a figure that is worth almost one and a half times everything Italy produces in a year. But what does it really mean, who pays for it and why does it continue to grow?
What is public debt, how is it formed and who owns it
Public debt is the sum of everything that the state must return to its creditors: private citizens, banks, investment funds, international institutions and other states. It accumulates every year in which the State spends more than it collects – and that difference is covered by borrowing money, mainly through the issuance of government bonds such as BTPs. Whoever buys them lends money to the State and in exchange receives periodic interest until the security matures.
Not all government deficit spending is the same. There are years in which a State goes into debt to build infrastructure or support the economy in a crisis: expenses which over time can generate growth and therefore resources to repay the debt. And there are years in which you go into debt to cover ordinary current expenses, without that money producing a measurable return. Italy historically does both, with a prevalence of the second category.
The share of public debt supported by Italian families has grown significantly in recent years, thanks to the success of BTP Valore (bonds intended mainly for individuals) which, thanks to the returns that have returned to positive after several years at zero interest, have made this investment interesting for savers.
The billions that come out of state coffers every year not to finance hospitals, schools or infrastructure, but to pay interest to creditors, exceeded 80 billion euros in 2025, 85.6 to be precise, more than the state spends on public education. It is the direct consequence of decades of deficit spending: every year in which we spend more than we collect, the accumulated debt grows, and therefore with it the amount of interest destined to remunerate those who finance it.
Why does Italian debt continue to grow?
We start from the assumption that public debt is usually expressed as a percentage of a country’s gross domestic product (GDP). This ratio is used to indicate how much debt a government has relative to the total size of its economy. The answer becomes structural, rather than linked to a single year or a single measurement. There are at least three mechanisms that push debt upwards almost automatically.
- The first is too slow economic growth. Italy continues to suffer from structurally weak growth, stagnant productivity and the enormous burden of interest on the debt accumulated over the years. GDP growth would be the only way to reduce the debt/GDP ratio without cutting or increasing taxes and the comparison with Greece makes this clear: Athens grows on average at 7.7% per year in the post-Covid period, Italy struggles to reach 1%. If the economy does not grow, the denominator (GDP) does not widen and the ratio worsens even if the nominal debt remains unchanged.
- The second is the interest costs of previous years’ debts. When the debt is high, the interest that the state pays every year to keep it up becomes a growing budget item, which in turn contributes to increasing the deficit and therefore the debt of the following year. It is the so-called snowball effect: if the interest rate on the debt is higher than the growth rate of the economy, the debt/GDP ratio tends to increase on its own, even without new additional spending.
- The third factor is more recent and is linked to the Superbonus. The State has granted tax credits (i.e. discounts on future taxes) to finance construction works, but these credits granted in recent years generate a delayed effect because the State does not lose this revenue when the bonus is granted, but rather in subsequent years, when it is actually used and therefore for several years less money will enter the state coffers from the taxes of citizens who have renovated their homes with these bonuses.
