Whilst the M5S challenges the maths of the debt, the broader political spectrum is also divided over public finances

There is much discussion about the divisions within the Campo Largo coalition, between Giuseppe Conte and Elly Schlein, regarding foreign policy and, in particular, military aid to Ukraine. Far less is said about the equally deep divisions over economic policy. Not so much about individual proposals – on which there is actually agreement – but about the most important aspect: the direction of budgetary policy, the so-called fiscal stance. Does Italy need a restrictive policy – ‘prudent’, as Minister Giorgetti puts it – or an expansionary one? Should it stick to the consolidation path agreed with Brussels, or throw it all out the window to run a higher deficit? 

On the one hand, the PD contests the government’s resource allocation decisions but does not question the consolidation of the public finances. On the other hand, the M5S fundamentally rejects the fiscal adjustment carried out during this parliamentary term by the Meloni government, which had inherited a deficit of 8 per cent and brought it down to 3 per cent. ““We are continuing with pro-cyclical policies based on austerity and the primary surplus, which historically have not produced positive effects for the country’s real economy,” said Senator Stefano Patuanelli to Minister Giorgetti during the hearing. “Over the last 26 years, we have been in primary surplus for 22 of them. Yet our debt has continued to rise, and yet the country has become poorer.” The same point was made shortly afterwards by his party colleague Gianmauro Dell’Olio: “Over the last 30 years, we have run a primary surplus for 25 of them, and the situation has not changed. We cannot keep doing the same things and expect different results,” he said, quoting a phrase attributed to Einstein to define the concept of madness.

First and foremost, the two MPs should be reminded that the sum of the primary surpluses over the last 25 years is, in reality, close to zero. But that is not the point. For over a decade, governments have benefited from exceptional financial conditions – first thanks to extremely low interest rates and then, following the pandemic, thanks to inflation which has inflated nominal GDP, thereby facilitating a reduction in the public debt-to-GDP ratio. Those conditions have now disappeared, and so the maths of public finance sustainability is once again central. The rule is simple: when nominal GDP grows faster than the average cost of debt, the debt-to-GDP ratio tends to fall even with a modest primary deficit, whilst when interest payments exceed growth, a primary surplus is needed to stabilise it: this is known as the ‘snowball effect’ and, from 2024, it has once again begun to work against us, as has been the case for decades in Italy (except for the three years following the Covid pandemic). For example, with debt at 140 per cent of GDP, nominal growth of 3 per cent and an average cost of 4 per cent, the debt-to-GDP ratio increases by around 1.5 percentage points a year even with a balanced primary balance; whereas to reduce it by 1 percentage point, a primary surplus of close to 2.5 per cent would be required.

In this respect, France is currently a negative example: in 2025, its debt reached 116 per cent of GDP, its deficit stood at 5 per cent, with a primary deficit of around 3 per cent and modest growth prospects – conditions that call for a fiscal adjustment which is no longer a trivial matter: the markets are losing confidence, demanding higher interest rates, and borrowing is becoming more expensive. Even more challenging is the situation in the United States, for which the IMF forecasts public debt in 2026 of close to 126 per cent of GDP, a deficit of around 7 per cent and a primary deficit above 3 per cent.

As regards Italy, it should be noted that in the post-Covid years, the country has benefited from a particularly favourable combination of factors, with nominal GDP growth significantly higher than the average cost of debt; however, it has not managed to translate this into an equally substantial reduction in debt, because part of the advantage was absorbed by the primary deficits accumulated during the recovery (namely expenditure recorded in previous years, particularly tax credits linked to the Superbonus). Consequently, by 2026, Italy had taken the top spot for the highest public debt in Europe.

One might counter this, as the M5S implicitly argues, by claiming that the primary surplus stifles growth. Common sense alone would suffice to realise that this is a rather nonsensical argument. However, a comparison with Greece and Portugal is instructive because both countries, which had debts as high as Italy’s, have in recent years combined strong primary surpluses with robust growth. But they are not the only ones. History is full of examples: Belgium, Canada, Denmark, Switzerland, Sweden and the Netherlands – but also Italy itself in the 1990s under the Olive Tree coalition governments led by Prodi and Ciampi – have reduced public debt through sustained primary surpluses without this stifling growth. On the contrary: if a fiscal policy is credible, it tends to lower the country risk premium, thereby reducing interest rates and thus stimulating growth.


This leads one to wonder how a government can be criticised, not for certain policy choices, but for failing to do the opposite of what the maths of public debt suggests. It is true that the macroeconomic and financial conditions after 2011 – and especially after Covid – left more scope for fiscal measures in a context of zero, if not negative, interest rates. But that era is over. We have now entered a phase of high nominal growth, high inflation and high interest rates, in which government bonds – particularly those of the most indebted countries – are under pressure.


For this reason, it would be appropriate for the broad coalition’s programme negotiations to define not only a common position on foreign policy but also a common line on economic and budgetary policy. The fundamental question that should be put to Conte and Schlein is therefore no longer simply ‘should we supply arms to Ukraine or not?’. But also: a primary surplus or a primary deficit? And at what level?