Net foreign purchases of Italian government securities, in particular by institutional investors, began to show signs of recovery in mid-2012, and continued through 2013. But the confidence of foreign investors, at times summarily dismissed as “speculators”, can be very quickly undermined by any sign of deterioration in a sovereign borrower’s creditworthiness.
Between summer 2011 and spring 2012, the share of Italian government bonds in foreign hands (not counting the Eurosystem’s purchases through the Securities Markets Programme) fell by 16 percentage points to 31 per cent. Before the crisis, Italy had postponed the reduction of its structural deficit and failed to grow enough to ensure a rapid reduction of the debt-to-GDP ratio.