Italy

Growth driven by investment and private consumption

The Italian economy is expected to continue its modest recovery in 2026. Growth will again be driven mainly by domestic demand. Investment will remain robust thanks to the gradual improvement in financial conditions but will remain subject to uncertainty weighing on the global commercial and geopolitical environment. In particular, growth is expected to be boosted by the disbursement of European funds in 2026 under the National Recovery and Resilience Plan, provided the government manages to implement them effectively. These funds will support construction, and more specifically infrastructure, partly offsetting the decline in the residential sector linked to the expiry of the Superbonus (subsidies introduced in 2020 for the renovation of buildings to improve their energy efficiency). These funds amount to EUR 194 billion, comprising EUR 72 billion in grants and EUR 123 billion in loans. Following the approval of the eighth installment in December 2025, Italy had received 79% of the total amount, which was well above the European average of 60%, but only 52% had been spent by the end of November 2025. Second, household consumption will contribute positively to growth on back of gains in purchasing power driven by the robust labour market and subdued inflation. By the end of 2025, the unemployment rate had fallen to 5.6%, i.e., its lowest level on record. Wage increases negotiated in collective agreements averaged 3.1% in 2025, once again outpacing inflation and thereby contributing to the rise in real disposable income, which has been accelerating since 2025. Despite these increases, real wages in September 2025 remained 8.8% below January 2021 levels. The 2026 Budget notably reduced the marginal rate for the second bracket of the income tax scale (between EUR 28,000 and EUR 50,000) from 35% to 33% after having already made the merger of the first two brackets permanent in 2025. Nevertheless, the household savings rate has continued to rise and reached 14.1% of disposable income in Q3 2025 (compared to an average of 11% between 2015 and 2019), reflecting continued restraint in consumption. Retail sales volumes have stabilised at around 4% below their pre-pandemic level since the end of 2023.

External demand will pick up slightly, but this will still be offset by a more sustained rise in imports. Exports of services are expected to remain buoyant, thanks in particular to tourism demand, which continues to trend upwards, albeit at a slower pace than in previous years. In 2025, arrivals of foreign tourists at tourist accommodation recorded annual growth of around 1%, following 9% in 2024 and 23% in 2023. The Italian economy will remain exposed to the fragile demand and recovery of its European neighbours, given that over 55% of its goods exports are destined for the rest of the EU. Furthermore, the US represents Italy’s largest trade surplus and its second-largest export market (11% of its exports) after Germany. Consequently, the Italian manufacturing sector (which accounts for nearly 15% of GDP) remains heavily exposed to US tariffs in the wake of 2025 which was marked by the effects of front-loading. The situation applies in particular to machinery and other capital goods, notably electrical goods, pharmaceuticals, shipbuilding and the automotive sector, which together account for more than half of exports to the US. Exports of goods are also exposed to increased competition from China and a loss of competitiveness due to the appreciation of the euro against the dollar.

Gradual fiscal consolidation

The consolidation of public finances will proceed gradually and could enable Italy to exit the European excessive deficit procedure – initiated in 2024 – as early as 2026. Despite successive cuts in personal income tax rates, revenue will benefit from the strength of the labour market, as well as from the increases in taxes on financial and insurance companies provided for in the 2026 Budget. Fiscal consolidation will also result from the expiry of the Superbonus renovation incentives (except for areas affected by earthquakes). However, despite the phasing-out of this incentive, it will remain a burden on public finances over the coming years, as the tax credits granted since 2024 must be claimed in equal instalments over ten years. Despite the fiscal consolidation trend, Italy has the second-highest public debt-to-GDP ratio in Europe after Greece. Unlike Greece, where the debt is largely held by public creditors, the majority of Italy’s debt (70%) is held by residents, a quarter of which is held by the Bank of Italy.

Although their situation has improved, Italian banks remain heavily exposed to domestic sovereign debt, which accounted for nearly 10% of their assets in April 2025 (down from the pandemic peak of 11%, but significantly higher than the eurozone average of 4%). Furthermore, the banking system is well capitalised (CET1 ratio of 16%), highly liquid (net stable funding ratio of 133%) and has a sound asset portfolio (non-performing loan ratio of 2.2% in Q3 2025). The government, however, is exposed to the private sector through contingent liabilities, which amount to 15% of GDP, the vast majority of which are Covid-related.

As regards the external accounts, the moderation in energy prices has helped restore Italy’s current account surplus, which had been interrupted in 2022 by the energy crisis. The current account surplus will continue this positive trend in 2026 but will remain below pre-pandemic levels (2015–2019 average close to 2.5% of GDP) due to rising imports driven by the gradual recovery in domestic demand, structurally higher energy prices and persistently fragile external demand. Although Italy benefits from a strong tourism and transport sector (mainly linked to tourism) generating a relatively stable surplus, its services balance will remain slightly in deficit.

Return to political stability

Following the collapse of the Draghi caretaker government in July 2022, the centre-right coalition secured a comfortable victory (43% of the vote, with 237 out of 400 seats in the Lower House) in the snap elections held in September 2022. The government is led by Giorgia Meloni, whose Fratelli d’Italia party came out well ahead with 26% of the vote. She is joined by Forza Italia (8% of the vote) and Lega (9%), together securing 237 out of 400 seats. After a long period of political volatility characterised by unstable coalitions, Giorgia Meloni has managed to consolidate strong support from Italy’s conservative political forces. The Prime Minister’s popularity on the Italian political scene was confirmed in the European elections of June 2024, where her party came out on top with nearly 29% of the vote, followed by the Partito Democratico (PD) with 24%. Benefiting from weak opposition from the centrist and progressive parties (PD and Movimento Cinque Stelle), the conservative coalition led by Meloni is expected to remain in power until the end of its term in 2027. Furthermore, the Prime Minister is expected to continue striving for constitutional reform that would enable the direct election of the head of government, despite the fact that the bill was already passed by the Senate in June 2024. Reform of this nature is difficult to achieve as amending the Constitution requires a two-thirds majority in Parliament or a simple majority followed by a referendum.

Heavy reliance on European funds to finance investment provides a strong incentive for the government to comply with EU conditionality. Efforts to improve the business environment through structural reforms, fiscal consolidation and public investment should therefore continue. Italy will need to speed up the rollout of reforms if it is to benefit from all the resources allocated to it before the deadline for disbursements in 2026.

Payment

Trade notes (cambiali) are available in the form of bills of exchange or promissory notes. Cambiali must be duly accepted by the drawee and stamped locally at 12/1000 of their value, being issued and payable in the country. When issued in the country and payable abroad, they are stamped at 9/1000, and finally stamped at 6/1000 in the country if stamped beforehand abroad, with a minimum value of €0.50. In case of default, they constitute de facto enforcement orders, as the courts automatically admit them as a writ of execution (ezecuzione forzata) against the debtor.

Signed bills of exchange are a reasonably secure means of payment, but are rarely used due to a high stamp duty, the somewhat lengthy cashing period, and the drawee’s fear of damage to his reputation caused by the recording and publication of contested unpaid bills at the Chambers of Commerce.

In addition to the date and place of issue, cheques established in amounts exceeding €1,000 and intended to circulate abroad must bear the endorsement non trasferibile (not transferable), as they can only be cashed by the beneficiary. To make the use of cheques more secure and efficient, any bank or postal cheque issued without authorisation or with insufficient funds will subject the cheque drawer to administrative penalties and listing by the CAI (Centrale d’Allarme Interbancaria), which automatically results in exclusion from the payment system for at least six months.

Bank vouchers (ricevuta bancaria) are not a means of payment, but merely a notice of bank domicile drawn up by creditors and submitted to their own bank for presentation to the debtor’s bank for the purposes of payment (the vouchers are also available in electronic form, in which case they are known as RI.BA elettronica).

Bank transfers are widely used (90% of payments from Italy), particularly SWIFT transfers, as they considerably reduce the length of the processing period. Bank transfers are a cheap and secure means of payment once the contracting parties have established mutual trust.

Debt Collection

Amicable phase

Amicable collection is always preferable to legal action. Postal demands and telephone dunning are quite effective. On-site visits, which provide an opportunity to restore dialogue between supplier and customer with a view to reaching a settlement, can only be conducted once a specific licence has been granted.

Settlement negotiations focus on payment of the principal, plus any contractual default interest as may be provided for in writing and accepted by the buyer.

When an agreement is not reached, the rate applicable to commercial agreements is the six-monthly rate set by the Ministry of Economic Affairs and Finance by reference to the European Central Bank’s refinancing rate, raised by eight percentage points.

Legal proceedings

When creditors fail to reach an agreement with their debtors, the type of legal action taken depends on the type of documents justifying the claim.

Fast-track proceedings

Based on cambiali (bills of exchange, promissory notes) or cheques, creditors may proceed directly with forced execution, beginning with a demand for payment (atto di precetto) served by a bailiff, preliminary to attachment of the debtor’s moveable and immoveable property (barring receipt of actual payment within the allotted timeframe). The resulting auction proceeds are used to discharge outstanding claims.

Creditors can obtain an injunction to pay (decreto ingiuntivo) if they can produce, in addition to copies of invoices, written proof of the claim’s existence by whatever means or a notarized statement of account. A forty-day period is granted to the defendant to lodge an objection.

Ordinary summary proceedings (procedimento sommario di cognizione), introduced in 2009, are used for uncomplicated disputes which can be settled upon simple presentation of evidence. Sitting with a single judge, the court determines a hearing for appearance of the parties, and delivers a provisionally executory ruling if it acknowledges the merits of the claim; the debtor however has 30 days to lodge an appeal.

Ordinary proceedings

The creditor must file a claim with the court (citazione) and serve summons to the debtor, who will file a defence (comparsa di constituzione e risposta) within ninety days via a preliminary hearing. The parties then provide briefs and evidence to the court. When the debtor fails to bring a defence, the creditor is entitled to request a default judgment. The court will usually grant remedies in the form of declaratory judgments, constitutive judgments, specific performance and compensatory damages but it cannot award any damages which have not been requested by the parties.

Undisputed claims are typically settled within four months, but the timescale to obtain an enforceable court order depends on the court. Overall, disputed legal proceedings take up to three years on average.

The current civil procedure code is intended to speed up the pace of proceedings by reducing the procedural terms, imposing strict time limits on the parties for submitting evidence and making their cases, and introducing written depositions in addition to oral depositions.

0

Enforcement of a Legal Decision

A judgment becomes enforceable when all appeal venues have been exhausted. If the debtor fails to comply with a judgement, the court can order compulsory measures, such as an attachment of the debtor’s assets or allowing the payment of the debt to be obtained from a third party (garnishee order) – although obtaining payment of a debt via the latter option tends to be more cost-effective.

For foreign awards, decisions rendered from a country in the EU will benefit from special procedures such as the EU Payment Order or the European Enforcement Order. Judgment from a non-EU country will have to be recognized and enforced on a reciprocity basis, meaning that the issuing country must be part of a bilateral or multilateral agreement with Italy.

Insolvency Proceedings

OUT-OF COURT PROCEEDINGS

The 2012 legal reform allows a debtor to file an application for composition by anticipation. Negotiation on an agreement commences 60 to 120 days prior to the initiation of judicial debt restructuration proceedings. The debtor retains control over the company’s assets and activities. A new pre-agreed composition plan may be agreed with the approval of creditors representing 60% of the debtor company’s debt.

RESTRUCTURING PROCEEDINGS

This settlement is a court procedure which allows a company in financial difficulty to propose a debt restructuration plan. The debtor files a proposal to the court to repay the total amount outstanding to the secured creditors. If the court admits it, a commissioner trustee is appointed, and if the majority of the unpaid creditors accept the proposal, the court will officially validate the proceedings.

Alternatively, a debt restructuring agreement (accordi di ristrutturazione del debito) aims to restructuring the debt so as to rescue the debtor company from bankruptcy proceedings. The debtor must file a report on its ability to pay the remaining creditors in full, who otherwise can challenge the agreement before a bankruptcy court by requiring verification that their claims will be paid as normal.

LIQUIDATION

This procedure aims to pay out the creditors by realising the debtor’s assets and distributing the proceeds to them. The status of insolvency justifies the adjudication of bankruptcy by the court, even where the insolvency is not due to the debtor’s misconduct. The court hears the evidences of the creditors’ claims and appoints a receiver to control the company and its assets. This receiver must liquidate all of the company’s assets and distribute the proceeds to the creditors to have the proceedings formally concluded.

Last updated: February 2026