Italy May Be Close to Getting Its Crippling Debt Load Down

(Bloomberg) -- Italy, saddled with the euro area’s second-biggest debt load after Greece, may be close to coming to grips with its problem.

It’s partly being helped by the economy, which has grown for 10 straight quarters and maintained its pace of momentum in the most recent quarter. In addition, the nation can thank a pickup in inflation and a drop in bond yields, a combination that gets the government nearer to reducing the load than it’s been in a decade.

For the first time since the financial crisis, the nation is enjoying a convergence of its economic growth, debt, inflation rates as well as average yields on government securities. It might be about to see gross domestic product rise more than public debt this year, thus reducing the debt-to-output ratio.

That’s a goal the government has been pursuing for a long time, as highlighted by Finance Minister Pier Carlo Padoan in a post on Twitter on Thursday.

“After stabilizing the debt, we now need to put it on a descending path, otherwise the country-risk will remain high.”

Padoan’s comments came as the country’s main business lobby forecast that debt will decline slightly to 131.8 percent of GDP next year from 132.6 percent in 2017. He also said the economy looks like it’s “back to normal.”

Confindustria also raised its prediction for growth and sees expansion of 1.5 percent this year. The Treasury will update its outlook next week.

Italy’s public debt reached a record 2.3 trillion euros ($2.7 trillion) in July, an increase of 18.6 billion euros from June, according to the Bank of Italy’s monthly report on Friday.

To contact the reporters on this story: Lorenzo Totaro in Rome at ltotaro@bloomberg.net, Giovanni Salzano in Rome at gsalzano@bloomberg.net.

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Alessandra Migliaccio, Dan Liefgreen