Italy: The End of the Superbonus Doesn't Halt Momentum

A Roman-Style Recovery Model

The end of the « superbonus, » an exceptional tax incentive designed to heavily subsidize energy renovation work, could have created a downturn in the Italian economy. This scheme, introduced in 2020 and gradually phased out since 2024, had boosted construction and supported post-Covid recovery. Yet, against all odds, the Italian GDP remains steady.
According to François-Xavier Chauchat of Lazard Frères Gestion, the country now benefits from a solid support mechanism: the NextGenEU European plan, launched during the pandemic, of which Italy remains the primary beneficiary. By the summer of 2025, 122 billion euros have already been disbursed, nearly two-thirds of the total planned envelope of 194 billion. These substantial funds are fueling a recovery in non-residential investment, which offsets the decline in residential investment. Result: total investment is on the rise again, bolstered by public orders and infrastructure projects.
The monetary context has also changed. Following a period of tension, the European Central Bank has initiated a gradual cut in rates, leading to a dramatic decline in long-term rates: the yield on Italian ten-year government bonds has fallen from 5% at the end of 2023 to 3.4% today. This easing supports the real estate market, where transactions are picking up and prices are rebounding, although they remain relatively low in real terms.
Finally, Italian banks, once the country's Achilles' heel, now boast strengthened balance sheets and a historically low rate of non-performing loans. Domestic credit is reactivating, fueling the recovery cycle.

Discipline Finally Pays Off

If Italy surprises with its resilience, it is also because it has been preparing for this phase of normalization for over a decade. From pension reform in 2011 to labor market reform in 2014-2015, up to the modernization of bankruptcy law between 2019 and 2022, the country has undertaken a series of structural reforms that are often painful but necessary.
This discipline has resulted in a consistent budgetary effort: Italian policy has been very restrictive for years, which now allows it to avoid a sharp tightening to compensate for the Covid crisis. As a result, the public deficit is contained at 3% of GDP and is even slightly positive excluding interest expenses.
Admittedly, public debt remains high at 135% of GDP, but fundamentals are improving. The external balances are positive with a current account surplus of 1.5% of GDP, the industrial balance shows a surplus of 6%, and price competitiveness has been restored after a decade of wage moderation. These improvements have not gone unnoticed by rating agencies: DBRS recently upgraded Italy's sovereign rating to « A- », praising a credible budgetary path and stable governance.
Italy is also benefiting from a convergence effect with the rest of the eurozone. After lagging more than 11% behind the per capita GDP from 2008 to 2013, the country is beginning to close the gap. The growth differential with its neighbors is narrowing thanks to a mix of reforms, European aid, and monetary normalization.

A Recovery Under Scrutiny

One unknown remains: productivity, the historical Achilles’ heel of the peninsula. Declining demographics and low innovation in certain sectors still limit the long-term growth potential. Forecasts predict a growth of 0.5% in 2025 and 0.75% in 2026, a modest increase but considered sustainable.
In a context where France worries the markets with its budgetary drift, Italy, paradoxically, appears as a virtuous student in Southern Europe. Its case illustrates that a strategy of slow but steady consolidation can be fruitful, especially when backed by a clear European industrial vision.
Far from the clichés of a country “ailing from the euro,” Italy is once again becoming a pillar of stability within the monetary zone. A model that, without inspiring dreams, offers inspiration: growth through steadiness, rather than through spending.