The ambitious economic program is making itself felt in the budget: Italy has taken on significantly more debt. The country was hardest hit by the corona crisis in the EU.
The already enormous national debt of Italy has risen sharply in the corona pandemic. In the first quarter of 2021, the country took on new debt amounting to 13.1 percent of economic output, as the national statistics office Istat announced on Thursday. The government expenditure rose accordingly by 6.3 percent compared to the previous year, while the receipts grew by only 1.4 percent.
Italy traditionally incurs the most debt in the first three months. Even compared to the same period of the previous year, the increase is considerable. At the beginning of the corona pandemic in the first quarter of 2020, the government deficit amounted to 10.6 percent of gross domestic product (GDP).
Italy is the largest recipient of the EU reconstruction fund
The government of Prime Minister Mario Draghi raised its deficit forecast for 2021 from 9.5 percent of GDP to 11.8 percent in April. The reason is an ambitious economic program. At the same time, Italy is the largest recipient of funds from the EU’s Corona reconstruction fund. 191.5 billion euros of the total of 750 billion euros are reserved for Italy. Rome is to receive a good third of this in the form of direct grants that do not have to be repaid.
Italy was the first European country to be massively affected by the coronavirus pandemic in February 2020. As a result, it recorded the worst economic slump since the Second World War last year, with a minus of 8.9 percent of GDP. National debt is expected to reach almost 160 percent of economic output by the end of 2021.
Because of the announced measures and aid, Draghi assumed a “very strong recovery” of the economy “in the coming months”. Only then could Italy “get out of the high debt”. The Italian economy has recently shown signs of improvement, with the National Bank anticipating growth of almost five percent this year.