Afterwards, in the run-up to the economic and monetary union (EMU), substantial stability was restored as public debt was progressively reduced from a peak of over 125 per cent of GDP in 1995 to about 105 per cent in 2007. This was largely the result of two factors: the reduction in interest payments and the rise in revenues from privatization programmes.
The fall in interest rates reflected not only the taming of inflation but also the reduction in “sovereign risk”. It is also well known that Italian households used to have high saving rates, while it is less well known that their levels of debt, and in general those of the whole of the private sector, have always been relatively low by international standards.