Italy's public debt rose above 2 trillion euros for the first time in October, underscoring the fragility of public finances despite austerity policies imposed by technocrat Prime Minister Mario Monti. Debt rose to 2.015 trillion euros ($2.64 trillion) from 1.995 trillion in September, the Bank of Italy said on Friday, continuing the steady upwards trend seen through most of this year.
The increase in the debt above the symbolic 2 trillion euro threshold will be unwelcome news to Prime Minister Mario Monti as he considers running as a candidate in a national election expected in February. His predecessor Silvio Berlusconi has attacked the former European commissioner over the economy and the centre-left Democratic Party (PD), expected to win the election, also says the austerity pursued by Monti and other countries is not working.
With the economy in steep recession for the last year and a half, the debt is also rising fast as a proportion of gross domestic product. The debt-GDP ratio, at an estimated 126.4 percent this year, is second only to Greece's in the euro zone and up from the level of 120.1 percent in 2011, which Monti inherited from Berlusconi. Italy's debt fell to 103 percent of GDP at the end of 2007 from 122 percent in 1994 as Italy benefited from a steep fall in interest rates due to monetary union, but the debt resumed an upward trend in the wake of the global financial crisis of 2008.