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Italy Has Built a Buffer to Shield Debt From Higher Rates

Tourists walk past retail stores and cafes near Lake Como in Bellagio, Italy, on Thursday, Aug. 24, 2017. Italy's economic recovery extended for a tenth straight quarter, boosting optimism that growth can become sustainable this year amid a rise in industrial production.
Photographer: Simon Dawson/Bloomberg
Updated on

Whatever the outcome of next month’s election, Italy’s bonds should be safe for a while yet.

With a debt of 2.3 trillion euros ($2.8 trillion), or about 132 percent of the country’s yearly output, investors are well aware that Italy’s finances risk coming under pressure every time spreads widen -- a realistic prospect after a vote in March that will prove inconclusive at best. Further down the road, the European Central Bank’s exit from ultra-low rates is set to raise borrowing costs in coming years.