A reduction in the risk premium on Italian public sector bonds is another crucial objective: at the beginning of this week the yield differential with respect to 10-year German bonds was over 270 basis points, more than twice the level prevailing in early 2018, before the latest general elections.
The premia on credit default swaps suggest that the yield differential has risen as a result of the increase in both credit risk and the risk of redenomination of bonds in a different currency. The high public debt-to-GDP ratio exposes Italy to the volatility of financial markets, with the annual amount of bonds to be refinanced currently standing at around € billion.