Meloni fixed Italy’s deficit. But real wages are still 6.1% below 2021.

Estimated reading time: 13 minutes

Giorgia Meloni’s cabinet passed 1,413 consecutive days in office on 4 September 2026. That figure overtook the 1,412 days of Silvio Berlusconi’s second government. No single administration in the history of the Italian Republic has lasted longer.

Meloni marked the record at a rally in Bari. She told supporters that four years of stability had strengthened Italy at home and abroad. She also noted that the three longest-serving governments of the republic all came from the centre-right.

Italy has run through 68 governments in eight decades. Longevity therefore counts as a genuine achievement. But longevity measures survival, not performance.

We want to test the second thing. This analysis asks a narrower question. What did four years of continuity actually change inside the Italian economy?

We judge the government on its own scoreboard

Fratelli d’Italia published a 28-page brochure ahead of the Bari rally. The document lists 23 headings of achievement. It leads with employment, tax cuts and the collapse in Italy’s risk premium.

We take that scoreboard seriously and we test it against the primary data. Our figures come from Istat, the OECD and the European Commission. The Bank of Italy and the Treasury supply the rest. Where the government and the statistical agencies disagree, we say so.

One pattern emerges across every dataset we examined. Rome bought credibility with restraint, and it paid for that credibility in real incomes.

That trade is the story. It is not a scandal, and it is not an accident. It reflects a deliberate choice, and the choice carries consequences that will outlast this parliament.

The spread carries the government’s strongest argument

The gap between Italian and German ten-year yields tells the clearest story. That spread hit 251 basis points in September 2022, just before Giancarlo Giorgetti took the Treasury.

It fell to 79 basis points by October 2025, it touched 59 basis points in January 2026, a fifteen-year low. It has hovered near 80 through the summer of 2026, despite a global bond sell-off.

Investors now charge Italy far less to hold its debt. The same period saw the French spread over Germany widen sharply. Italian ten-year yields closed to within a whisker of French yields, the narrowest gap since 2005.

Shorter-dated Italian paper already trades through its French equivalent. Markets have quietly reordered European sovereign risk, and Italy climbed.

Seven rating actions arrived in nine months

Rating agencies moved in a cluster through 2025. S&P raised Italy to BBB+ in April. Moody’s lifted the outlook to positive in May. Fitch upgraded to BBB+ in September, its first Italian upgrade since 2021.

DBRS promoted Italy to A (low) in October. Scope and KBRA both shifted their outlooks to positive in the same month. Moody’s then raised the rating to Baa2 in November, Italy’s first Moody’s upgrade in 23 years.

S&P moved the outlook to positive again in January 2026. Fitch pointed to a stable political environment and continuing reform momentum. Agencies rewarded predictability more than growth.

That distinction matters for everything that follows.

The deficit fell faster than Brussels demanded

Meloni inherited a deficit of 7.2 per cent of GDP. Superbonus building credits then pushed the 2023 figure to 7.4 per cent. The EU opened an excessive deficit procedure against Italy in July 2024.

The correction since then has been steep. The deficit reached 3.4 per cent in 2024 and 3.1 per cent in 2025. The European Commission expects 2.9 per cent for 2026.

Higher employment and higher wages delivered the extra revenue. Italy also returned to a primary surplus in 2024, the only G7 country to manage that after the pandemic.

Giorgetti built three budgets around a single objective. He kept the headline number below the European threshold, and he largely succeeded.

Brussels declined to close the file

Many inside the majority expected the reward in June 2026. They assumed a deficit under three per cent would end the procedure automatically. Brussels disagreed.

The European Semester package delivered a careful formula. The Commission recommended full repeal for Malta alone.

Suspension leaves Rome under observation. The Commission can reopen mandatory correction if the numbers slip. Giorgetti still welcomed the package, because Italy won flexibility on energy spending worth 0.3 per cent of GDP a year.

The same package carried a second warning. The Commission’s social convergence report found that many Italians remain at risk of poverty despite existing support.

The tax changes did reach pay packets

The government cut the tax wedge on labour from January 2023. It widened the cut to incomes up to €40,000 in the 2025 budget, adding three million taxpayers.

It compressed personal income tax from four brackets to three in 2024. The 2026 budget then cut the second rate from 35 to 33 per cent for incomes up to €50,000. That change touched 13.6 million taxpayers.

Fratelli d’Italia claims these measures put over 21 billion injected directly into Italians’ pockets.

One number complicates the claim. Italy’s total tax burden still stood at 42.5 per cent of GDP, above the EU average of 40 per cent.

The welfare change defined the government’s first year

Meloni scrapped the citizens’ income in 2023 and replaced it with the inclusion allowance. Roughly 169,000 households learned by text message that their payments would stop.

The old scheme cost around €8 billion a year. The replacement costs around €5.4 billion, and it reaches only households with minors, older people or disabled members.

The government argued that the old benefit discouraged work. Critics called the rollout cruel and the savings modest. Both readings survived contact with the data.

Employment did rise sharply afterwards. Absolute poverty did not fall.

Employment reached levels Italy had never recorded

The labour market delivers the government’s second strongest argument. Italy’s employment rate climbed to 63.2 per cent, a national record. Female employment reached 54 per cent, also a record.

Unemployment fell to 5.0 per cent in May 2026. The OECD called that an all-time low, and it matched the OECD average of 4.9 per cent. Istat put the July reading at 5.8 per cent after a choppy summer.

Italy joined a small southern European group where unemployment kept falling. Greece, Portugal and Spain sat alongside it. Unemployment rose in roughly two-thirds of OECD countries over the same year.

Youth unemployment remains the weak point at 18.9 per cent in July, well above the euro area’s 14.9 per cent.

Real wages tell the opposite story

Here the scoreboard breaks. Italian real wages in the first quarter of 2026 sat 6.1 per cent below their level of early 2021.

That gap is the largest among the large OECD economies. It amounts to roughly twenty days of unpaid work a year in lost purchasing power.

The OECD expects real wages to fall a further 0.9 per cent across 2026. It forecasts a rise of just 0.2 per cent in 2027. Energy-driven inflation of around three per cent outpaces nominal wage growth of about 2.2 per cent.

Twenty-five collective agreements still await renewal. Those contracts cover roughly 3.9 million employees, and their delay caps the recovery in pay.

The new jobs sit in low-productivity sectors

The composition of the new jobs explains much of the gap. The OECD locates much of the growth in tourism, consumer services and construction.

Those sectors pay less and produce less per hour. More employment therefore does not automatically make Italian households richer.

The debt ratio moved the wrong way

Deficit discipline did not translate into falling debt. Italy’s debt-to-GDP ratio reversed its decline in 2024. It stood at 137.1 per cent in 2025.

The Commission forecasts 138.5 per cent for 2026 and 139.2 per cent for 2027. Superbonus tax credits explain most of that reversal, and Istat valued those credits at 2.8 per cent of GDP.

Draghi-era housing incentives therefore continue to shape Meloni-era balance sheets. The cash costs land years after the policy ended.

Rome cut the flow and inherited the stock. That sequencing defines the fiscal record more than any single budget line.

The arithmetic that stability cannot fix

Debt ratios fall when growth exceeds the interest rate on debt. Italy currently fails that test in both directions.

Growth reached 0.5 per cent in 2025, against a euro area average of 1.5 per cent. The Bank of Italy expects 0.6 per cent for 2026. The Commission forecasts 0.6 per cent for 2027.

Average interest costs run far above those growth rates. The gap keeps the debt ratio drifting upward even with a balanced primary account.

Commission projections place Italy last in the EU for growth in 2027 and first for public debt. Stability protected the country from crisis, and it has not yet produced expansion.

Three former prime ministers deliver a verdict

Mario Monti governed Italy through the 2011 debt crisis. He told CNBC that Meloni had survived partly through inaction.

Monti argued that she avoided confrontations that might have modernised the economy through competition. Those fights would have cost her political consensus. He now wants a crackdown on tax evasion and fuller application of competition law.

Paolo Gentiloni praised the fiscal caution that brought the spread down. He then called the fall in household spending power a failure.

Enrico Letta focused on Europe. He argued that stability between European states matters more than calm inside Italy. He also criticised the summer’s disputes over migration and Schengen.

Investors praise the record and still hesitate

Lauren Hyslop of Mattioli Woods described Meloni’s central surprise to CNBC. Meloni governed as a fiscal pragmatist rather than a populist, and markets rewarded that choice.

Ken Egan, senior director for sovereigns at KBRA, made a similar point. Italy used to carry an automatic political instability premium, and that premium has faded considerably. Egan noted that Italian ten-year total returns lead European peers this year.

Jason Borbora-Sheen of Ninety One accepted the improvement and questioned the trade. He described a self-reinforcing loop between stability, lower debt costs and voter satisfaction.

His team still sees no compelling case for buying Italian government debt. The fundamentals improved, and the market has already priced them.

The state came back to the banking sector

Meloni’s government reshaped Italian banking more aggressively than any recent administration. It backed Monte dei Paschi di Siena as it absorbed Mediobanca in a €13.3 billion share exchange.

Meloni framed that deal as the birth of a third Italian banking pole. The Treasury still holds 4.9 per cent of MPS after the 2017 bailout. Rome favours a later merger with Banco BPM.

Rome also used golden power rules to set conditions on UniCredit’s bid for Banco BPM. Brussels issued a formal warning over that intervention, because both parties were Italian.

Opposition senators raised parliamentary questions about the Treasury’s role. Intesa Sanpaolo then launched its own bid for MPS in June 2026, and consolidation continues.

The recovery plan ended this month

Italy holds the largest national allocation under NextGenerationEU at €194.4 billion. Rome had received 72.2 per cent of that money by mid-2026, or €140.4 billion.

That absorption rate sits well above the EU average of 56.4 per cent. Italy outperformed most member states on drawing the funds down.

It also requested a final revision reallocating €14 billion. That revision stripped out measures Italy could not finish before the hard deadline of 31 August 2026.

Business groups have voiced concern about the outcome. The plan financed much of Italy’s recent investment growth, and that stimulus now stops.

Demography sets the ceiling

Fabio Panetta, governor of the Bank of Italy, has framed the long-run constraint plainly. Italy’s working-age population will shrink by more than seven million by 2050.

Panetta warns that weak productivity turns that shrinkage into falling output and welfare. Italian productivity has barely moved for 25 years.

The government responded on the supply side rather than the birth rate. It authorised almost half a million legal entries for non-EU workers between 2026 and 2028.

That decision cuts against the party’s founding rhetoric. It also acknowledges an arithmetic that no coalition can legislate away.

Poverty barely moved

Istat counted 5.7 million people in absolute poverty in 2024, or 9.8 per cent of residents. That covered 2.2 million households, and the figure stayed broadly flat across three years.

The share at risk of poverty or social exclusion improved slightly. It fell to 22.6 per cent in 2025 from 23.1 per cent. Immigrant households remain far more exposed.

Opposition leaders press this point hardest. Elly Schlein calls the government’s health funding insufficient to reach the European average. She describes the budgets as austerity.

The government points instead to €3.5 billion of social measures and a reformed means test. Both sides cite real numbers.

The next budget carries the election

Italy votes in 2027, and the autumn budget will set that campaign’s terms. Meloni has already named growth and security as her two themes.

Rome must now decide whether to activate the EU escape clause for defence. Planned defence increases run to 0.15 per cent of GDP in 2026 and 0.5 per cent by 2028.

Energy costs complicate everything. Italy imports more Qatari LNG than any EU country, and the Hormuz disruption hit it harder than its peers.

The government wants further income tax cuts. Brussels wants a debt ratio that finally falls.

What 1,413 days actually bought

Credibility behaves like a stock, and growth behaves like a flow. Meloni rebuilt the stock with remarkable speed, and the flow kept thinning.

Italy now borrows cheaply, employs more people than ever and runs a deficit inside European limits. It also pays its workers less in real terms than it did in 2021.

Piero Ignazi, the political scientist, put the underlying tension to Al Jazeera. He then argued that Italy chose stasis instead.

That argument will decide the 2027 election. Voters will judge whether four years of calm delivered anything they can spend.