Public debt: what it is, how big Italy's is, and why it matters

A stock, not a bill to pay off in one go

When people talk about public debt, they mean everything a government owes its creditors: bonds, loans and deposits built up over the years. Italy is a case in point. At the end of June 2026 the general government debt reached €3,207.2 billion, a new record according to Banca d’Italia. Compared with May 2026 (€3,181 billion), the increase was €26.2 billion in a single month; compared with June 2025 (€3,071.4 billion), it was about €135.9 billion over twelve months. Since January 2026 the monthly growth has continued almost without interruption, with increases of at least €20 billion a month, apart from a slight dip in April.

It’s a textbook distinction that headlines often blur: the deficit is the difference between government revenue and spending in a single year, a flow; public debt is instead a stock, the accumulation over time of past deficits, plus other technical factors such as refinancing costs. A positive yearly deficit (spending exceeding revenue) increases the debt; a “primary surplus” (revenue exceeding spending, net of interest) can slow its growth, even if the total debt stays high.

Italy’s 2025 budget deficit came to 3.1% of GDP, an improvement on 3.4% in 2024 (Eurostat); in the same year the euro area’s average deficit fell to 2.9% (from 3.0% in 2024), while the EU27’s held steady at 3.1%.

Gross debt, net debt, Maastricht debt

The figure quoted on the news — the so-called “Maastricht debt” — is defined under the European ESA 2010 rules: it covers currency and deposits, debt securities and loans, valued at face value (not market value). It’s a gross measure: it doesn’t subtract the financial assets a government holds, such as cash reserves or equity stakes. A hypothetical net debt figure would be lower, but it isn’t the official measure used in European treaties or in comparisons between countries.

Real-world example: if a government owes €3,200 billion but also holds cash and equity stakes worth several tens of billions, the “Maastricht debt” still reads €3,200 billion — nothing gets subtracted. That’s why every international comparison uses the same gross yardstick for every country.

How the state borrows

Italy covers its financing needs by issuing government bonds through the Treasury Department of the MEF: BOTs (Treasury bills, maturity up to 12 months), BTPs (multi-year Treasury bonds, medium to long-term) and CCTeus (floating-rate Treasury certificates, indexed to Euribor). Alongside these are inflation-linked instruments, such as BTP€i and BTP Italia, and retail-focused bonds like BTP Valore, BTP Green (earmarked for environmental spending) and BTP Futura.

Instrument	Share of bonds outstanding (end of June 2026)
Nominal BTPs	71%
BTP€i (inflation-linked)	8%
BOTs	5%
CCTeus	5%
BTP Valore	4%
BTP Green	2%
BTP Italia	2%
Foreign-currency bonds	2%
BTP Futura	1%

The total stock of government bonds outstanding was €2,712 billion as of 31 August 2026: a figure distinct from the total general government debt (€3,207.2 billion in June 2026), because it excludes loans and deposits. On that same date, the average residual maturity of all outstanding bonds was 6.93 years: in other words, the debt isn’t paid off all at once, but keeps getting refinanced as older bonds mature and get replaced by new issuance.

How big it is versus GDP

The debt-to-GDP ratio is the most widely used measure for comparing countries of different sizes. At the end of March 2026, according to Eurostat, Italy’s debt-to-GDP ratio stood at 138.9%, up from 137.1% at the end of 2025 — a ratio that had already risen by 2.4 percentage points between the end of 2024 and the end of 2025.

Country	Debt to GDP (end of Q1 2026)
Greece	143.5%
Italy	138.9%
France	117.6%
Belgium	109.1%
Spain	101.6%
Euro area (average)	88.9%
Germany	64.4%

Italy ranks second in the European Union, after Greece, with a ratio more than double Germany’s. The euro-area average, at 88.9%, was up from 87.7% at the end of 2025.

Who holds the debt: domestic and foreign

Another useful distinction is between domestic debt (held by residents of Italy) and foreign debt (held by non-resident investors). As of May 2026, according to Banca d’Italia, 35.9% of the debt was held by non-resident investors, up from 35.7% in April 2026. The rest was held mostly by residents: Banca d’Italia held 17.2% in May 2026, down to 16.7% by the end of June, while “other residents” — mainly households and non-financial firms — held 14.5% (down from 14.7%). Overall, then, most of the debt remains in the hands of residents of Italy: a distinction that matters for understanding who receives the interest the government pays, part of it going to Italian savers and institutions, part to foreign investors.

Why it makes headlines: interest, ratings and markets

High debt costs money. In 2025 Italy’s interest spending on public debt came to 3.8% of GDP, the highest share among euro-area countries — almost double France’s, Spain’s and the euro-area average, four times Germany’s — according to the CPI Observatory at Università Cattolica. The debt’s implicit cost — interest spending as a share of the total stock — was 3.0% in 2025; the average cost at which the Treasury issues new bonds rose from 2.75% to 2.93% between 2025 and 2026.

How cheaply a government can borrow depends largely on how reliable markets consider it. The main rating agencies have tracked Italy’s sovereign debt closely: between 2025 and 2026, S&P, Moody’s, Fitch and Scope raised or confirmed with a positive outlook their assessments (Moody’s, for instance, raised its rating to Baa2 in November 2025, a first step after several years without an upgrade, according to the news coverage of the move). A higher rating signals lower perceived default risk and usually allows for cheaper borrowing; a lower one does the opposite. The BTP-Bund spread — the yield gap between 10-year Italian government bonds and the interest rates on equivalent German bonds — is the most closely watched market indicator of how much riskier investors see Italy than Germany, and it also spills over into stock prices and financial markets more broadly.

A debt-to-GDP ratio that keeps rising makes a country more sensitive to higher interest rates or to a drop in market confidence. There isn’t, though, a fixed threshold beyond which a crisis or a recession automatically follows: what also matters is a country’s ability to keep finding, month after month, investors willing to buy its bonds on sustainable terms.