Italy public debt hits record in February

In February, the Bank of Italy announced that its public debt had increased to 1.708 trillion euros. It had risen nine billion dollars in just one month and has caused the income from tax revenues to decrease sharply. This meant the Italian government had about 2.685 billion dollars less to work with. The article states that Italy has the third largest public debt in the world which equaled more than their annual GDP. Furthermore, it is predicted that the economy would shrink by 3.7% this year (the worst performance for more than 50 years) which puts a strain on the resources needed to eventually pay off the debt.

Public debt is the money owed by all levels of government and has an impact on inflation. To the average citizen, the concern over the public debt is tied to rising prices because increased borrowing and spending by governments create an increase in demand for goods and services. The burden to pay off the debt is on citizens (who pay through raised taxes) and maybe present for future generations. It is often seen as unfair because the politicians who created the problem are not in power, yet their problem must be solved by the people living 20-30 years from now.

For people in school right now (GRAD '09), we should be concerned about what our parents and their votes towards politicians. The mess that they make could make us shake our heads and think "how stupid", but it also means that we may be cleaning it up afterwards. A decade from now when we are starting jobs, families, ect. the public debt and how much of it is paid off will impact our taxes. In order to finance government borrowing and spending, the marginal tax rate must be raised which means less money in peoples pockets. To pay off a high public debt, incomes are decreased and the ability to spend follows which decreases any confidence the public has on its elected government.