economy

Italy's Political Divisions Could Hurt Its Ability to Borrow Money

Italy's fractured political system may damage its credit rating, which affects how much it costs to borrow.

By Piggy PressSep 11, 20262 min read 2 new words

In simple terms

If Italy's credit rating falls, the government will pay more to borrow money, leaving less for public services and potentially making loans and mortgages more expensive for Italian citizens.

When a country wants to borrow money internationally, lenders look at its credit rating—similar to a personal credit score—to decide how risky it is to lend. Fitch Ratings, one of the main organizations that assigns these scores, is warning that Italy's government is becoming increasingly divided. Different political factions within Italy are struggling to work together, and this instability concerns the rating agencies.

Why does this matter for ordinary people? When a country's credit rating drops, borrowing becomes more expensive. If Italy has to pay more to borrow, it has less money for schools, roads, healthcare, and other services. It can also affect Italians' financial situations—banks and businesses might raise interest rates, making mortgages and loans costlier for everyday citizens.

Fun fact

A country's credit rating works just like an individual's credit score—the better your rating, the lower interest rates you get when borrowing.

Economy

Source: Bloomberg Economics