Italy cannot exceed its financial capacity because of its massive debt, according to the country’s Finance Minister Giancarlo Giorgetti.

“It’s an element that is a constraint which we can’t avoid. It’s our main constraint even before the rules defined by the European Union,” Giorgetti said whilst speaking at an event in Rome on Monday.

As Europe ramps up defence spending, Italy struggles to keep up due to its massive debt, which exceeds 130% of its economic output.

Giorgetti has recently resisted excessive expenditures, warning that they could undermine confidence in Italy and drive up borrowing costs, Bloomberg reports.

Italian Prime Minister Giorgia Meloni is especially wary of market pressures, having witnessed the collapse of Silvio Berlusconi’s government, where she served as a junior minister, in 2011 after a surge in bond yields.

This lesson was reinforced when she took office in October 2022, coinciding with UK leader Liz Truss’s resignation amid investor concerns over her economic policies.

This is why Giorgetti and Meloni have been especially cautious in their economic policy decisions, aiming to keep Italy free from market turbulence, the report goes on to add. The spread between Italian and German 10-year bonds, a key risk indicator, remains below 115 basis points, and Meloni intends to maintain that stability.

However, with its high debt and relatively fragile economy, Italy is often the first to face market instability. GDP grew by only 0.7% last year, falling short of the government’s 1% target, and the Bank of Italy projects a modest 0.8% increase for this year.