The major risk of debt: the world spends more on interest than on AI

According to estimates by the Institute of International Finance (IIF), published yesterday in the ‘Global Debt Monitor’ report, the governments of advanced economies (including Italy) have paid approximately 3,500 billion dollars in debt interest alone over the past year: more than the whole world invests in AI (2,600 billion), defence (3,100 billion) or energy (3,400 billion). The IIF, which brings together around 400 financial institutions from over 60 countries, has also confirmed that global debt has exceeded 365,000 billion dollars. Although, as a proportion of global GDP, there has been a 25 percentage point fall from the peak in 2021, according to the IIF this improvement is superficial and due to inflation, which has reduced the real value of the debt. “However,” warn the institute’s analysts, “as debt is refinanced at higher rates, the growth in interest expenditure relative to revenue and public spending is gradually eroding these benefits”. Consequently, this additional strain comes on top of the surge in energy prices triggered by the war in the Middle East – which central banks, from the ECB to the Fed, have begun to counter by raising interest rates.

According to the IIF, the average cost of borrowing for G7 countries is at its highest level since mid-2008, whilst their debt servicing costs are almost 85 per cent higher than they were 18 years ago. Yields on government bonds are reaching record levels. In mid-September, the German 10-year Bund hit 3.54 per cent, its highest level in fifteen years, whilst the US Treasury yield rose to 2023 levels. The Japanese 10-year bond reached 3 per cent, a level not seen since 1996.

Italy is entering this phase of crossfire from multiple crises with a debt standing at 136.7 per cent of GDP at the end of 2025, which, according to the Bank of Italy, reached 3,205 billion euros in July (440 billion more than at the end of 2022). Every year, the Treasury issues between 350 and 365 billion in medium- and long-term securities, largely to redeem those maturing, at prevailing rates. Consequently, interest expenditure is rising: according to Istat figures published on Tuesday, in 2025 the Italian government paid around 87 billion in interest (+2 per cent), representing 3.8 per cent of GDP.

Deputy Prime Minister Matteo Salvini has called for “a deviation amounting to billions”. The paradoxical aspect, as former Economy Minister Giovanni Tria has pointed out in these pages, is that Italy’s continued involvement in the infringement procedure makes it easier to resist electoral demands. Yesterday in the Chamber of Deputies, Minister Giancarlo Giorgetti explained that, before any decisions are taken, “the public finance framework will need to be updated with the macroeconomic forecasts”. He will certainly take debt risks into account.