Italy bond spread falls as Meloni cites stability

Fratelli d’Italia is leaning heavily on the bond market as proof. The spread between Italy’s 10-year BTP and Germany’s Bund has fallen to 80 basis points from 233 at the start of Meloni’s term in October 2022, a drop that reduces interest expense on one of the euro zone’s largest debt stocks and underpins the government’s claim that markets reward continuity. The party also says Italy now trades through France on that measure, a symbolic reversal that helps Meloni’s coalition frame its tenure as a credibility story as much as a policy one.

The fiscal backdrop is better than it was, even if it is still far from comfortable. The deficit has narrowed to 3.1% of GDP in 2025 from 8.1% in 2022, though the government says the improvement would have been stronger without the drag from the Superbonus housing scheme. For investors, that leaves two readings: bulls will point to a steady consolidation path that should keep a lid on borrowing costs, while bears will note that Italy remains heavily indebted and vulnerable to any growth disappointment or slippage in future budgets.

Labour-market data are the government’s other pillar. Employment has risen by more than 1 million since Meloni took office, to 24.3 million in July 2026, while the jobless rate has fallen to 5.8% from above 8% in 2022. Youth unemployment has dropped to 18.9%, and the share of permanent contracts has increased by 1.3 million, suggesting a less precarious labour market than the one that greeted the administration in late 2022. That supports domestic demand and tax receipts, although some of the improvement also reflects a broader post-pandemic labour recovery across Europe.

Exports are another key element of the government’s case. Sales abroad in the first half of this year were nearly 10% above the first half of 2022, with exports up 2.7% over the four-year period and shipments to the United States rising 7.2% in 2025 despite tariffs. That is important for an economy as dependent on manufacturing and foreign demand as Italy, especially at a time when growth across the euro zone remains uneven and industrial production has shown signs of strain.

The political narrative is straightforward: Meloni is presenting stability as an economic policy in itself. The government says that steadier politics have helped deliver better financing conditions, more jobs, stronger exports and a tighter deficit, while also funding tax cuts, family support and public-sector pay deals. The opposition, led by Elly Schlein and Giuseppe Conte, is expected to attack the same record by arguing that healthcare remains underfunded and that headline gains have not been felt evenly across households.

For investors, the central question is whether the credibility gains are durable. A spread at 80 basis points gives Rome some breathing room, but Italy still needs growth to stay positive and public finances to keep improving if the market is to continue giving it the benefit of the doubt. The next test will be whether the government can turn a political argument about stability into a budget that protects spending, keeps borrowing costs contained and does not force a rethink on medium-term debt sustainability.