Italy Surpasses Greece as Eurozone's Biggest Debtor Amidst Economic Headwinds

Italy is on track to become the eurozone's most heavily indebted nation, edging past Greece by the close of 2026. New budget projections reveal Italy's debt ratio is expected to peak at 138.6% of GDP this year, up from 137.1% in 2025, while Greece's debt shrinks to an estimated 137%.

Officials privy to the data, speaking anonymously, confirmed this shift, which will be formalized in Greece's updated multi-year fiscal plans shortly to be submitted to European authorities. The move marks the end of Greece's two-decade reign at the top of the eurozone's debt charts.

Despite both countries grappling with high debt loads, Greece has managed a marked reduction since hitting a staggering 209.4% of GDP in 2020, a figure that fell by over 60 percentage points to 145.9% last year. Italy, by comparison, trimmed its own hefty debt by roughly 17 percentage points over the same period.

Greece's plans to pay back approximately 7 billion euros ahead of schedule from its initial bailout program underlines its commitment to deleveraging. The country's stronger recent economic growth-averaging above 2% annually, buoyed by investments and tourism-contrasts with Italy's more tepid performance.

Italy's economy has languished with under 1% growth annually from 2023 through 2025, despite access to billions in pandemic recovery funding from the European Union. The Treasury's multi-year budget projects this sluggish trend to persist until 2029.

Prime Minister Giorgia Meloni has attributed delays in Italy's debt reduction to legacy policies including state-backed construction incentives initiated under previous administrations, which reportedly undermined fiscal progress.

Italy's debt trajectory anticipates a plateau throughout 2027 at around 138.5%, followed by gradual declines to 137.9% in 2028 and 136.3% in 2029. Nonetheless, the shift in who carries the heaviest debt burden in the eurozone spotlights broader economic challenges and differing post-crisis recovery paths within the bloc.

For market watchers, Italy's persistent debt levels amid minimal GDP growth raise questions about the sustainability of its fiscal position and the impact on investor confidence, especially as European financial markets navigate ongoing geopolitical and macroeconomic uncertainties.