Italy takes over from Greece as the most indebted country in the eurozone

The short version

• Italy's debt ratio climbs to 138.6 percent of economic output in 2026, while Greece falls from 146.1 percent to 136.8 percent.
• Greece has cut its ratio by more than 60 percentage points since the 2020 peak of 209.4 percent.
• Italy plans to reduce its ratio to 136.3 percent by 2029, a path its own budget watchdog considers too optimistic.

Italy will overtake Greece on public debt at the end of 2026 and take over last place in the eurozone after two decades. According to the multi year budget plan of the Italian finance ministry, the ratio rises to 138.6 percent of economic output in 2026, up from 137.1 percent in 2025.

The Greek debt agency expects a decline from 146.1 percent to 136.8 percent in the same year. The International Monetary Fund reaches similar figures and forecasts 138.4 percent for Italy and 136.9 percent for Greece.

The gap is small, the direction unambiguous. Italy is rising and Greece is falling.

Greece has cut 60 points

The Greek peak came in 2020 at 209.4 percent. Since then the ratio has fallen by more than 60 percentage points, the sharpest decline ever recorded by a eurozone country.

Two factors drive that. The primary balance, meaning the gap between revenue and spending before interest, improved by twelve percentage points between 2020 and 2025, from a deficit above seven percent to a surplus of five percent. Growth added to it. Between 2021 and 2025 the Greek economy expanded by an average of 7.7 percent in nominal terms, with a sizeable part of that coming from the inflation years of 2022 and 2023.

A further point concerns the structure of the debt. A large share of Greek liabilities dates from the rescue programmes after 2010 and is held by public creditors at very long maturities and low fixed rates. Greece is therefore better shielded against rising market rates than a country that has to refinance itself continuously.

Italy does not have a spending problem

Italy does not have a runaway deficit but a growth problem. From 2023 to 2025 the country recorded three consecutive years of growth below one percent. That happened despite a steady inflow of billions from the European recovery funds.

Under its own budget plans, debt peaks in 2026 at 138.6 percent, stays broadly flat in 2027 at around 138.5 percent, falls to 137.9 percent in 2028 and to 136.3 percent in 2029. That is a reduction of 2.3 percentage points in three years.

Italy's own budget watchdog is sceptical

The Italian budget watchdog has publicly questioned those projections. Its chair Lilia Cavallari told lawmakers that the debt reduction announced from 2027 onwards could turn out smaller than planned. She named rising energy costs stemming from the conflict in the Middle East as a particular risk.

The point is concrete enough. Italy imports a large share of its energy and depends more than the European average on energy intensive manufacturing.

For the European Central Bank the shift matters less than it sounds, because the bank looks at inflation across the entire currency area. The Italian situation becomes relevant through the yield spreads between the government bonds of member states. That spread has stayed comparatively calm in recent years, which owes less to fiscal policy than to the expectation that the central bank would step in if things turned serious.

Final figures for 2026 will not be available until spring 2027. Until then these are forecasts from two governments and the monetary fund.

Frequently asked questions

Which country has the highest debt ratio in the eurozone in 2026

On current projections Italy takes last place in the eurozone at the end of 2026 with 138.6 percent of economic output. Greece falls to 136.8 percent in the same year. The International Monetary Fund puts Italy at 138.4 percent and Greece at 136.9 percent.

Why is the Greek debt ratio falling so fast

Greece improved its primary balance by twelve percentage points between 2020 and 2025, from a deficit above seven percent to a surplus of five percent. Nominal growth averaged 7.7 percent between 2021 and 2025. Together the two have cut the ratio by more than 60 percentage points since 2020.

Does Italy have a deficit problem

Italy does not have a runaway deficit but a growth problem. From 2023 to 2025 growth stayed below one percent for three straight years, even as billions flowed in from the European recovery funds. Without growth a debt ratio barely moves, however sound the budget.

Why is Greece considered protected despite high debt

A large share of Greek liabilities dates from the rescue programmes after 2010 and sits with public creditors at very long maturities and low fixed rates. Rising market rates therefore feed through only slowly. A country that refinances continuously on the market feels such rate moves much faster.

This analysis is for information only and is not investment advice.