Italy is expected to have a budget deficit of 3.3% of GDP this year, while France’s is likely to reach 5.4% of GDP. Italy seems set to align with the European rule of keeping the deficit to 3% of GDP next year, but France aims to meet this target only by 2029.
Financial markets have noticed, with investors viewing French bonds as risky as Italy’s. The two countries’ 10-year bond yields both reached 3.49% on Thursday.
Although Italy’s credit rating remains below France’s, they might be gradually converging. Fitch recently upgraded Italy’s rating from BBB to BBB+, soon after downgrading France’s from AA- to A+.
In past crises, Italy often turned to technocratic governments led by outsiders like Mario Monti and Mario Draghi, supported by mainstream parties.
However, resentment over Monti’s reforms aided the rise of populist parties like the 5Star Movement and the League, according to Lazar, an expert on Franco-Italian affairs. Ten years later, Meloni leveraged her opposition to Draghi’s government, presenting herself as anti-establishment and winning the 2022 elections.
Macron’s team likely views the Italian technocratic option unfavorably, aware it could boost Marine Le Pen’s National Rally before next year’s municipal elections and the 2027 presidential race.
Hanne Cokelaere contributed to this report.
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