Italy Braces for Larger Debt Load Amid Political Infight

Italy’s government expects debt to rise more than expected this year, as it gets ready to boost fiscal stimulus to support its battered economy.

The Treasury, led by Finance Minister Roberto Gualtieri, expects Italy’s debt to rise to 158.5% of output in 2021, up from 155.6%, while the country’s budget deficit would be 8.8%.

The new forecasts, first reported by Corriere della Sera, reflect the struggle of the eurozone’s third-biggest economy amid a resurgent coronavirus outbreak and a deepening political crisis.

The government, led by Prime Minister Giuseppe Conte, agreed to a request for a 32 billion-euro ($39 billion) increase in debt on Thursday evening. It’s the fifth time the administration has sought to expand its borrowing limits since Italy went into its first national lockdown last March.

The country is set to receive the biggest share ofEuropean Union aid. It’s entitled to as much as 81 billion euros in grants from the EU and a potential 127 billion euros in loans. This has been a key issue in a clash between Conte and a junior ally in his coalition, Matteo Renzi, who has withdrawn support from the government.

The cabinet’s new funding request must be approved by parliament. It’s expected to be used to compensate businesses hit by coronavirus restrictions, to extend furlough payments for workers and for spending on health care.

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