The high weight of public debt and growth expectations among the lowest in Europe place Italy in a condition of special surveillance within the current European panorama. Although there are signs of recovery and our forecasts, in line with the MEF and the OECD, anticipate a trend reversal for the debt/GDP ratio starting from 2018, the uncertainty that characterizes the national and international political framework requires us to keep focus on debt. Its high level, together with the fact that significant shares are held by national banks and other financial operators, hinders progress at the European level to complete the banking union and increase the degree of risk sharing between countries.
The latest data published by the Bank of Italy report a peak debt of 2017 trillion in July 2300, however the last few years show encouraging elements of discontinuity in its management. The growing dynamics of the debt/GDP ratio recorded a sharp slowdown (the cumulative growth from 2013 to 2016 was only 3 percentage points, from 129% to 132%) and the favorable financing conditions deriving from QE, within a the climate of confidence restored, enabled the government to adopt an emissions policy aimed at controlling interest rate risk and refinancing risk.
In fact, the issues of shorter-term securities were reduced, while the weight of deposits on the medium/long-term segment increased, thus allowing the average residual life of the debt to rise to 7.4 years (against the minimum of 6.77 in the summer of 2014) and of the securities component at 6.89 years compared to 6.2 reached during the crisis. In addition, the MEF quarterly data show a more homogeneous distribution of maturities, also obtained through swap transactions, and an increase in the share of fixed-income securities.
The path undertaken is certainly virtuous, however it is a slow and gradual process as the volume of debt is such that the impact of new issues on the characteristics of the entire stock of securities is moderate. Furthermore, the fear that the greater offer of medium/long-term securities could trigger a steepening of the rate curve leads the government not to force its hand in lengthening so as not to jeopardize the convenience of the operation. This prudent debt management, which has certainly made it possible to mitigate the main risks associated with it, does not, however, exonerate us from looking carefully at these risks again.
Figure 3, which shows our estimates of the annual volume of issuance for the next few years, shows us that the financing of maturing bonds and the budget deficit will require placements of an average of 400 billion a year, a considerable amount, especially if compared to the less intense collection activity by the main European countries. The large volume of placements is also weighed down by the further factor of uncertainty constituted by the tapering phase by the ECB.
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