Public debt sustainability, fiscal rules and monetary policy

The sustainability of the Italian public debt is not a source of concern for the next few years. In the longer run, however, sustainability will depend on reaching a structurally higher rate of growth for the Italian economy. While the investments and reforms related to the Italian RRP could achieve this objective, several doubts arise about the ability of future Italian governments and institutions to guarantee its successful implementation. At the EU level, the reform of the SGP should provide the chance to make a deal among EU countries: a rigorous set of fiscal rules should be balanced with a common fiscal capacity to provide some European public goods. In the meantime, the Ecb has introduced a new instrument (TPI) to cope with speculative attacks on high-debt countries. In addition, the Eurosystem will not withdraw its support to the government bond market: the repayment of the outstanding LTROs implies a significant downsizing of the Eurosystem’s balance sheet, reducing the necessity to implement quantitative tightening