Italy’s borrowing costs in the spotlight again

The rise in energy prices and the slight loss of popularity of Giorgia Meloni’s government have caused Italy’s bond yields to rise more than France's since the start of the Iran conflict. We now think Italy's deficit is likely to edge up this year rather than fall. However, Meloni is still well ahead in the opinion polls and seems committed to fiscal responsibility, and we expect Italy’s deficit to remain much lower than France’s.