Italy-Greece economy comparison

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It was early 2025 when the *Financial Times* named Giancarlo Giorgetti Finance Minister of the Year. The reason? His commitment to reducing the growing deficit and supporting public investments with a long-term plan to lower the debt-to-GDP ratio, after several governments that had instead increased it. In short, it finally seemed that, for once, Italy was heading down the right economic path.

Yet, little more than a year has passed, and today, according to forecasts for 2026, Italy will be the country with the highest debt-to-GDP ratio in the Eurozone—surpassing even Greece. Yes, the very same Greece that in 2010 was on the brink of default and under Troika supervision.

How was all of this possible? And why did Greece manage to reverse course while Italy remained stagnant?

Let's start with some data. And make sure to hit that like button on the video, because after this, you might be a bit less inclined to do so!

In the Italian public finance document from April 2026, Italian debt is projected to rise to 138.6% of GDP, up from 137% in 2025. During the same period, the Greek Public Debt Management Agency forecasts that Athens' debt will drop from 146% to 136.8% of GDP.

The gap isn’t massive, but what’s impressive is the direction. In 12 months, Rome rises by 1.5 percentage points, while Athens drops by 9.3 points. The overtake was expected for 2028, but it arrived two full years early!

Okay, but beyond the sensationalist headlines in the news, saying that we are worse off than Greece is extremely misleading. The debt-to-GDP ratio only shows how heavy the debt is relative to what the country produces in a year, without considering the absolute scale. In absolute terms, these two economies are on completely different levels—it’s like comparing two different leagues.

In February 2026, Italy's public debt stood at €3.14 trillion. Greece's public debt at the end of 2025 was €363 billion. Basically, Italy's debt is almost nine times that of Greece.

Fortunately, the same applies to GDP. Italy has a GDP of €2.25 trillion; Greece has just €250 billion. So Italy's economy is also nine times larger than Greece's.

The reality is that Italy and Greece have similar debt-to-GDP ratios for completely different reasons. Let's keep it simple so you leave this video with clear data in mind.

Greece has an economy based mostly on services, accounting for roughly 78%, with industry at 18% and agriculture at 4%. Tourism is the true engine of their real economy. In 2024, it contributed directly €30 billion—13% of GDP. But if we include indirect effects—think hotels, restaurants, transport, and retail—the share exceeds 30%. This means that one out of every three euros in Greece depends, directly or indirectly, on someone visiting on vacation.

But follow me here. Even so, if we look at the top five companies by market capitalization on the Athens Stock Exchange—because yes, dear investors, there is an Athens Stock Exchange—you won't find a single tourism operator.

Among the largest listed Greek companies are three major banks—Eurobank, National Bank of Greece, and Piraeus—along with Metlen Energy & Metals, which deals in energy and metals, as you might guess.

This sends a clear signal: the Greek recovery isn't just relying on beaches and tourism, but on a financial and industrial system that past reforms have put back on its feet.

However, one fact remains: dependence on tourism remains a structural Achilles' heel for the country. In fact, in 2020, with the COVID shutdowns, Greek GDP plunged by 9% in a single year.

And here we come to a topic that few of you know about. Do you know what the other great pillar of the Greek economy is? Naval armaments and shipping. Greece is the number one country in the world for merchant fleets, with 5,691 ships—20% of global shipping capacity in terms of tonnage. And to put that into perspective, it accounts for 61% of the entire European fleet.

The sector represents between 7% and 8% of GDP and has brought over €150 billion into the Greek economy over the last decade, employing more than 150,000 people.

So, while Greece excels in shipping, its traditional industry remains small and concentrated on oil refining, food processing, and basic metals, lacking a heavy or high-value-added industrial sector.

Italy, from this point of view, is a completely different story. It is the second-largest manufacturer in Europe and the seventh-largest in the world. Italy's industrial sector accounts for 24% of GDP, with manufacturing alone making up 15%.

As we know, Italy's main exports are machinery, transport equipment, textiles, pharmaceuticals, and high-quality food products. Unlike Greece, Italy has a trade surplus. This means it exports more than it imports, and it also means that the debt of a manufacturing and export economy is qualitatively different from that of a tourism-driven economy.

Yet, paradoxically, despite having a much broader industrial base, Italy's growth remains low—around 0.5% to 0.6% of GDP in 2025–2026. Meanwhile, between 2021 and 2025, Greece grew at an average rate of 7.7% per year.

Now, anyone familiar with investing knows a fundamental rule: in percentage terms, it’s easier to grow at higher rates when starting from a smaller base—and remember, the Greek economy is one-ninth the size of Italy's. Still, the data is striking.

To understand how Greece managed to turn things around, we have to step back in time to 2009, when the newly elected Prime Minister, Papandreou, revealed that previous governments had falsified budget figures. This triggered chaos: spreads skyrocketed, credit ratings were downgraded, and financial markets shut their doors.

It was a total disaster. Greek debt jumped from 130% of GDP in 2009 to 175% in 2011. In 2010, the first Troika bailout package arrived, worth €110 billion. Two years later, in 2012, came a second €130 billion package—but this time with a very harsh condition.

Banks and investment funds holding Greek government bonds had to accept a 53.5% hair-cut on their value. Put yourself in the investors' shoes: if you lent 100 to Greece, you were left with 46.5. A net cancellation of about €100 billion—effectively a default, even if agreed upon and called by other names.

In exchange, Greece adopted drastic structural reforms: digitalization and an independent tax authority, raising the retirement age to 67, and cuts to higher pensions. Add to that greater labor market flexibility, reducing systemic banks from 10 to 4, and privatization alongside opening up the gas and electricity markets. A total revolution, but one that came at a massive social cost.

Consider this: GDP collapsed by 25% in five years. Unemployment reached 27%, with youth unemployment peaking at an incredible 40%. Public healthcare, as you can imagine, was severely weakened. Populist parties emerged, and the 2015 referendum almost led to an exit from the Euro.

So, starting from a very dark place, but after paying this heavy price, Greece began seeing the fruits of these sacrifices around 2017–2018.

To make a long story short: the primary budget went from a 10% deficit in 2009 to a stable 5% surplus in 2025. Post-pandemic dynamics further accelerated growth, with public investments shifting from construction toward industry, infrastructure, and technology.

Their National Recovery Plan, named 'Greece 2.0', allocated 38% of resources to the green transition and 20% to digital transformation. All of this will help boost real GDP in Greece in 2026 by an estimated 7%—compared to Italy's 0.5%.

Naturally, when GDP surges, the debt-to-GDP ratio drops. It went from a peak of 210% in 2020 during COVID down to the projected 136% for 2026. Shaving off 70 percentage points in six years is no small feat!

And what about Italy? This is where the comparison gets interesting.

As we know, Italy's main issue is sluggish growth. There are several reasons we've discussed before—energy costs that lower competitiveness, tax burdens, public debt leaving little fiscal room, plus bureaucratic hurdles.

The core point is that with growth projected at just 0.5% to 0.6%, debt grows faster than nominal GDP due to higher interest rates, triggering the snowball effect. Even with a positive primary balance and a projected 2026 deficit of 2.9%, the debt-to-GDP ratio keeps climbing.

As we often say, this isn't just about the current government. Italy carries a massive debt burden, leaving any administration with limited options. Debt reduction is a long-term process.

One common argument is that Greece succeeded thanks to European aid. That's partially true: Athens received €244 billion from Eurozone countries and about €31 billion from the IMF. Around 90% of its current debt stems from those loans, which carried lower-than-market interest rates.

So yes, Greece received favorable terms. But it's not just about Greece. Since the post-COVID peak in 2020, all major Eurozone debtors have reduced their debt-to-GDP ratios. Ireland dropped from 112% to 32%, Cyprus from 113% to 55%, Portugal from 134% to 86%, and Spain from 119% to 98%. It’s a trend across multiple countries.

Since 2023, while these countries continued to lower their ratios, Italy reversed course and started rising again.

Meanwhile, the Athens Stock Exchange closed 2025 up over 44%, rewarding structural economic recovery. For bond investors, Greece issued a €4 billion 10-year bond in January 2026 at a 3.47% yield, with demand exceeding €50 billion. In early 2024, Fitch upgraded Greek debt back to Investment Grade after a decade in Junk status.

For Italy, market sentiment is less enthusiastic, though not dramatic. The BTP-Bund spread has remained relatively stable, even amid recent geopolitical tensions. Political stability has helped keep the spread in check.

However, the message remains clear: with such a large debt, every percentage point in bond yields heavily impacts the budget.

To summarize: Greece's overtake is symbolic in some ways, but very real in others. Athens paid a huge social price to fix its finances, but today it is growing and backed by structural reforms. Italy is improving its public accounts slowly, but growing too little to offset the debt.

The lesson is simple: debt itself isn't the problem—it becomes sustainable if the economy grows. Greece showed it's possible, but structural reforms require political courage and short-term costs."