For the first time in modern eurozone history, Italy is borrowing on terms as favourable as France, signalling a remarkable reversal in investor perceptions.
On September 18, yields on 10-year government bonds in both countries aligned at 3.475 per cent, erasing a risk premium that for over a decade placed Italy firmly below France in creditworthiness.
As recently as 2011–12, investors demanded more than four percentage points extra to hold Italian debt over French bonds. Even in late 2022, the spread remained at 180 basis points.
The convergence, first hinted at in July when five-year Italian bonds briefly traded below their French equivalents for the first time since 2005, has now materialised across longer maturities.
Italy’s repositioning reflects a combination of fiscal discipline and political stability under right-wing Prime Minister Giorgia Meloni.
Despite a debt burden exceeding 135 per cent of GDP, Rome has returned to a primary budget surplus and steadily narrowed its deficit since the pandemic.
Labour market gains, rising tax receipts and the tailwinds of EU recovery funding have bolstered revenues, while rating agencies now view the country with a positive outlook. Fitch is even expected to consider an upgrade.
France, by contrast, faces mounting doubts. Credit rating agency Fitch downgraded Paris earlier in September, citing the absence of a credible path to stabilising public finances. Public debt now stands at roughly 114 per cent of GDP, while political gridlock has undermined the government’s capacity to enact reforms.
Emmanuel Macron, lacking a parliamentary majority, has cycled through three prime ministers in under a year. Attempts to rein in spending have provoked street protests, most recently against a proposal by former PM François Bayrou to scrap two public holidays in a bid to save billions of euros. The plan was swiftly abandoned following public outcry.
Italy, meanwhile, is moving in the opposite direction. On the same day markets confirmed its improved standing, parliament advanced a proposal to reinstate October 4 as a national holiday in honour of Saint Francis of Assisi and Pope Francis, who died in April.
The move, supported across Meloni’s coalition, contrasts sharply with France’s aborted austerity initiative. Italy already marks 12 national holidays, compared with France’s 11, yet politicians argued that the day would symbolise peace, unity and respect for nature on the 800th anniversary of the saint’s death in 2026.
There was a public holiday in honour of the saint before, but it was cancelled in 1977 due to austerity measures.
Analysts note that while Italy still grapples with weak demographics and low productivity, its government has delivered consistency and workable relations with Brussels.
France, in turn, struggles with structural deficits, an ageing pension system and political volatility. Christoph Rieger of Commerzbank recently predicted it was only a matter of time before France’s 10-year yields exceeded Italy’s, a scenario once unthinkable.
This economic turnaround stands in marked contrast to the forecasts of Meloni’s progressive critics, who branded her government “far-right” and even “fascist”, warning that Italy was plunging into a populist deep end, as they did with Argentina and the US when the Right won the elections.
Yet the supposedly “responsible” economies of France and Germany now find themselves mired in financial difficulties.
COMMENT: The French may not be sure if they want to turn to the populist Right or the Marxist-tinged Left, but they increasingly are sure that staying the course with Macron is intolerable, writes @HenryOlsenEPPC. https://t.co/G8100z4zYA
— Brussels Signal (@brusselssignal) September 11, 2025
