Italy’s budget deficit is projected to come in at 3.3 percent of gross domestic product this year, while France’s looks likely to hit 5.4 percent of GDP. Rome appears poised to fall in line with European rules that limit the figure to 3 percent of GDP next year, whereas Paris plans to achieve this target only in 2029.
Financial markets have taken note. Investors now consider French bonds as risky as Italy’s. The 10-year bond yields of the two countries closed at exactly the same level of 3.49 percent on Thursday.
While Italy’s credit rating is still lower than the French one, there are signs that the two might be slowly converging. On Friday, Fitch upgraded Italy’s rating from BBB to BBB+, just days after cutting France’s rating from AA- to A+.
During past crises, Italy often resorted to technocratic governments led by outside figures such as Mario Monti and Mario Draghi, and backed by mainstream parties.
However, widespread anger at the reforms spearheaded under Monti helped fuel the rise of populist parties such as the 5Star Movement and the League, said Lazar, the Franco-Italian affairs expert. Ten years later, Meloni managed to capitalize on her opposition to Draghi’s government by portraying herself as an anti-establishment leader and winning the 2022 elections.
Macron’s camp likely finds little inspiration in the Italian technocratic option, knowing full well it could further fuel Marine Le Pen’s increasingly popular far-right National Rally ahead of important municipal elections next year and a presidential contest in 2027.
Hanne Cokelaere contributed to this report.
