Driven by a weaker euro and higher prices, Italy’s public debt hit a record high mid-year, the Bank of Italy announced on Tuesday, Trend reports quoting Xinhua.
The Public Finances Supplement to the bank’s monthly bulletin, published on Tuesday, said debt stood at 2.766 billion euros (2.812 billion US dollars), the highest level ever in absolute terms. The total is 1.9% higher than the 2,714 billion euros ($2,759 billion) at the start of the year.
A weaker euro was one of the contributors to the rising debt level, as most Italian debt is denominated in euros. At the end of June, when the data from the Bank of Italy report was tabulated, the dollar and the euro began to trade on roughly equal footing, with the dollar briefly exceeding the value of the euro several times in July.
Rising prices have been a mixed factor in the growth of public debt, the Bank of Italy said.
Rising prices have pushed tax revenues up: the Bank of Italy report indicates that tax revenues increased by 11.9% in the first six months compared to the same period last year, adding another 23.2 billion euros ($23.6 billion) to government coffers.
But inflation combined with other factors such as political uncertainty in the country and worries about the economic impacts of the Ukraine crisis pushed bond yields to their highest levels since 2014. The 10-year benchmark Italian state was 3.135. percent. That’s down from a peak of over 4% in mid-June, but up from 1.089% at the start of the year.
Higher bond yields, a reflection of investor nervousness about a country’s economic prospects, increase government borrowing costs.
Rising government spending is another major contributor to the country’s rising indebtedness as the government has taken measures to help the country emerge from the negative economic impacts of the COVID-19 pandemic.
One of the factors contributing to Italy’s debt situation this year is the return of tourism. According to the Italian JFC Observatory, tourist tax revenue has increased by almost 80% so far this year compared to the same period in 2021, as the sector rebounded from travel restrictions due to the pandemic.