Due to its poor state finances and delays in receiving transfers from the European Union, Italy, the only significant member of the euro zone, upped its forecast for debt issuance this year on Friday.
The upward revision occurs as borrowing costs in Rome are rising significantly and investors' worry over the country's deteriorating economy and budgetary slippage is mounting.
The Treasury increased its estimate for the total amount of gross debt issuance this year to 333 billion euros ($351.95 billion) in its issuance plan for the fourth quarter, which was announced late on Friday.
This contrasted with their early-year prediction of 310–320 billion euros.
Rome's public debt will climb to a record 2.85 trillion euros, currently the second-highest in the euro zone as a percentage of GDP.
GDP is the next largest after Greece's.
This year, several European nations have moved in different ways.
Germany's needs dropped by 31 billion euros ($32.59 billion) in the fourth quarter. Similar actions were taken by the European Union and Portugal.
Due to a rise in debt redemptions, France will issue more bonds next year, but its plan for this year will remain the same.
The debt-to-GDP ratio was predicted in new projections adopted by the government on Wednesday to be stable at roughly 140% from 2023 to 2026 as opposed to dropping toward 60% as required by European Union budget rules before they were halted in 2020 because to the COVID-19 epidemic.
The predictions also indicated that additional budget deficits would be used to support initiatives totaling 21 billion euros until 2025.
EU FUNDS DELAYED
an Italian Inability to adhere to the policy requirements set by the European Commission in exchange for billions of euros in post-pandemic recovery funds has made it more difficult for the government to achieve its budget needs.
In a note to clients on Friday, JP Morgan forecasted that a delay in receiving an overdue second tranche of EU funds would result in an increase in the sale of Treasury bills or bonds this year to make up the gap in funding.
The Treasury calculated on Friday that it has already covered almost 80% of its total budget requirements through 2023. Earlier estimates from analysts put the percentage at around 90%.
Rome's borrowing costs are increasing in the meantime.
As a proxy for market perception of Italy's high level of debt, the difference between Italian and German 10-year yields increased to 200 basis points. Friday morning London trading saw its highest level since March.
The 10-year BTP yields reached their highest point in 11 years on Thursday in Italian auctions.
According to the Treasury, Italy's average cost of funding ended August at 3.62%, the highest level since 2008 and up from 1.71% in 2022.
Giorgia Meloni, the prime minister, stated on Friday that she was unconcerned about the recent increase in Italian bond yields.
The Treasury anticipated that the gross issue of medium- and long-term bonds for the fourth quarter was roughly 60 billion euros, while the net issuance after redemptions was estimated to be a minus 12 billion euros.
($1 = 0.9462 euros)
Italy increases its 2023 debt issue as its state finances sputter.
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