ATHENS / ROME - In a historic reversal of fiscal fortunes, Italy is projected to become the euro zone’s most indebted country this year. According to the latest fiscal outlooks from both nations, Italy will overtake Greece for the first time in nearly two decades as Athens successfully slashes its debt burden through aggressive reform and steady growth.

The shift marks a major symbolic victory for Greece, which has carried the distinction of being Europe’s most indebted nation since the height of the sovereign debt crisis.

The Great Divergence: 2026 Projections

The gap between the two Mediterranean economies is driven by opposing fiscal trajectories. While Greece’s debt is in freefall, Italy’s remains stubbornly elevated.

Source: National Treasury and Fiscal Outlook reports.

🇬🇷 Greece: From Crisis to Comeback

Greece’s recovery is being hailed as one of the most significant fiscal turnarounds in modern history. Since peaking at 209.4% in 2020, Athens has reduced its debt-to-GDP ratio by over 60 percentage points.

Factors for Success:

   •   Economic Outperformance: The Greek economy has grown by over 2% annually for three years, fueled by a booming tourism sector and strong domestic demand.

   •   Early Repayment: Bolstered by its recovery, the Greek government plans to repay €7 billion from its first international bailout ahead of schedule later this year.

   •   Fiscal Discipline: Over a decade of painful reforms and three international bailouts totaling €280 billion are finally yielding a sustainable downward debt path.

🇮🇹 Italy: Sluggish Growth and "Legacy" Costs

In contrast, Italy is struggling to manage a debt pile that is expected to peak in 2026. While the Treasury expects debt to ease slightly to 136.3% by 2029, the short-term outlook remains pressured.

Challenges for Rome:

   •   Slow Growth: Italy has recorded sub-1% growth for three consecutive years (2023–2025), despite receiving billions in EU recovery funding.

   •   Fiscal Legacy: Prime Minister Giorgia Meloni has attributed the rising debt to costly state-backed building incentives—like the "Superbonus"—introduced by previous administrations.

   •   Refinancing Needs: With high debt levels and modest growth, Italy remains sensitive to shifts in global interest rates and market sentiment.

The Road Ahead (2027–2029)

According to Italy's multi-year budget plan, the debt-to-GDP ratio is expected to stay broadly stable after 2026:

2027: 138.5%

2028: 137.9%

2029: 136.3%

The revised Greek projections will be formally submitted to the European Commission later this month, officially confirming the end of its 20-year reign as the euro zone’s fiscal outlier.