![\"\"](\"https:\/\/www.europesays.com\/uk\/wp-content\/uploads\/2025\/08\/italiaaa.png\")
<\/p>\n\n Just a month ago, we were talking here about the end of the historic spread on short-term maturities between Italy and France. Now we are back with a slightly more alarming observation: the end of the spread between 10-year bonds. And Giorgia Meloni does not intend to stop there: she is now targeting Germany.\n <\/p>\n
For a long time, Europe has been divided into a “hard core” of stable borrowers and a more fragile “periphery.” This distinction now seems outdated.<\/p>\n
<\/p>\n
\nAlready, Italian 5-year debt is trading at a lower rate than France’s. And the same movement is happening in the long term.<\/p>\n
\nTwo dynamics are intertwined: the ongoing deterioration of France’s public finances and increased market confidence in the policies of Giorgia Meloni and her government. Meloni’s leadership is seen as a stabilizing force. With a stronger euro, investors looking for a European haven or fleeing the dollar have a new prot\u00e9g\u00e9.<\/p>\n
\nAdmittedly, Italy has a higher debt-to-GDP ratio and France has stronger growth. But investors view their trajectories very differently. French Prime Minister Fran\u00e7ois Bayrou’s attempt to present a budget recovery plan was not enough to reassure the markets. The French political scene, which has been unstable for over a year, is a cause for concern. Without a majority, ambitious proposals for a return to a balanced budget are likely to remain dead letters.<\/p>\n
\nConversely, the coalition led by Fratelli d’Italia (Brothers of Italy) enjoys a solid majority. And the Italian government is working to bring its deficit back to the European target of 3%. It has fallen from 4.3% of GDP to 2.8% in one year. In France, the hope is to return to below 3% within four years \u2013 a trajectory considered too slow by the markets but, above all, difficult to achieve.<\/p>\n
![\"\"](\"https:\/\/www.europesays.com\/uk\/wp-content\/uploads\/2025\/08\/italia.png\")
<\/p>\n
\nItaly-France spread on 10-year rates (Source: World Government Bonds)<\/p>\n
\nUntil 2022, it seemed normal for Italy to borrow at a rate 1 point higher than France. This paradigm is now shifting. At the end of 2023, Giorgia Meloni’s rise to power initially unsettled the markets. Her right-wing stance and aggressive tone initially aroused mistrust. The ongoing political instability in France and Italy’s economic reforms then made the slope increasingly steep.<\/p>\n
\nPerhaps we should wait and see what happens when Italy catches up with Germany on these same deadlines, with the spread below 0.9% for the first time since 2010.<\/p>\n
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