Europe’s Pitch Book: Italy - the resilient Nonna
The desk underscores a shift in perception towards Italy, viewing its economic resilience, despite historical stagnation, as a prime opportunity for investment. Per the full note by Marieke Blom and Paolo Pizzoli, Italy's labor participation has improved significantly, challenging the longstanding stereotype of the nation's work ethic. This resilience is essential for our positioning as we consider the implications for EUR/USD, which may benefit from a more favorable Italian outlook coupled with broader eurozone developments.
What the desk is arguing
Italy, often stereotyped as economically stagnant, is showing signs of resilience with a marked increase in labor participation. According to the commentary, Italians now work around 1,700 hours annually per worker, surpassing several core European nations like Germany and the Netherlands. This revised perspective argues for a reconceptualization of Italy's potential, implying it could be poised for economic recovery.
The commentary also highlights a substantial 10 percentage point increase in overall employment participation from 2000 to 2023, suggesting that the country is more capable of adapting to economic pressures than commonly perceived. Such data points reinforce the narrative that Italy, the so-called 'Nonna' of Europe, is more resilient and hardworking than its past reputation might suggest.
Where it sits in our coverage
Our consensus target for EUR/USD stands at 1.075, with a range from 1.04 to 1.12. Specific firms provide the following Dec-26 targets:
The desk's alignment with a more optimistic view of Italy's economic state sits at the upper end of the spread in our consensus outlook, particularly reinforcing jpmorgan's perspective.
How other firms see it
Firms aligned with a more optimistic outlook towards Italy and the EUR include jpmorgan and goldman. In contrast, bofa forecasts a more conservative target, reflecting lingering concerns regarding Italy's structural issues.
As investors evaluate the impact of Italy's economic transformation, tracking EUR/USD for potential upward movement aligned with improving Italian data could provide key trading signals.
What the calendar says
There are no significant upcoming events on the calendar that are likely to impact the EUR/USD in the near term. However, ongoing assessments of European economic data surrounding Italy could offer insights into the currency's trajectory in the absence of major scheduled events.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Italy's labor participation has risen by 10 percentage points since 2000, indicating improved economic engagement.
- 02The average working hours per Italian worker are now higher than several major European economies, challenging stereotypes.
- 03The desk sees potential for EUR/USD appreciation based on these positive Italian economic indicators.
- 04Our target aligns with a broader positive sentiment towards Italian recovery despite historical challenges.
Market implications
Watch for EUR/USD to respond positively to the ongoing narrative surrounding Italy's economic recovery, particularly as participation rates improve further.
Risks to this view
If economic data from Italy fails to improve or worsens due to unforeseen factors like political instability or global downturns, the optimistic outlook would need reevaluation.
Opinions Opinion by Marieke Blom and Paolo Pizzoli Europe’s Pitch Book: Italy - the resilient Nonna Published 16:24 Italy Translate You may think you know Europe’s Nonna: Italy. Now’s a good time to look again: she’s back to work, has restructured the house and has some new tricks up her sleeve. Weak past performance does not rule out a future renaissance This is the country that’s known for its lack of productivity growth, multi-decade stagnation, government debt overhang and inability to reform.
Why would we include this country in Europe’s Pitchbook – a series intended to make you see Europe’s strengths and opportunities, rather than only the weaknesses and risks? Well, if we can make you think differently here, maybe we can make it anywhere. The way Italy is typically viewed through an economic lens is so negative and so full of clichés that it deserves another look.
In the family, we think of Italy as the Nonna – at the heart of the table, warm and preparing the good food. She is also seen as slow, struggling to keep pace with the times. But we’d like to remind you that the Mediterranean diet has kept Nonna stronger than you might think.
So, here's how we're going to approach this: we'll assume you already know enough about the country’s troubles and focus instead on what is going well. Yes, that’s unbalanced. But so is your view of Italy, we dare to say.
Nonna’s at work You know the cliché: Italians are permanently out to lunch, and by August, they’ve disappeared altogether. But the stereotype deserves an update. Let’s start with hours worked per worker.
At some 1,700 hours per worker per year, the country ranks 12th among OECD countries, well above Germany, Switzerland, the Netherlands and the Nordics. Italians do put in the hours, compared to many other European countries. Meanwhile, the country has seen a 10 percentage point increase in overall participation between 2000 and 2025.
This is a very significant increase, which implies Italy has been catching up compared to the rest of Europe. The increase was driven by two groups: older workers and women. Among 55- to 64-year-olds, labour participation increased by 30 percentage points between 2004 and 2024.
The main reason was pension reforms. Among women, the country saw a 14 percentage point increase in participation . In 2024, 65% of women between 25 and 54 were working, implying Italy was much closer to the European average.
A strong pick up in female and elderly participation rates Share of people working to total population (%) Source: OECD via FRED "> Source: OECD via FRED Italy has long struggled with stagnant productivity per hour worked. Here, the country has faced a trade-off: typically, labour productivity slows when labour participation increases strongly. The increase in participation therefore explains some of Italy’s underperformance on the productivity front.
Looking ahead, there is more room to improve participation further, particularly among women and older workers, which could help to compensate for some of the effects of the country’s ageing population. The foundation of the house has been put in order You will likely remember the problems in Italy's banking sector. The country was at the heart of the bank-sovereign doom-loop: banks with weak balance sheets, full of government bonds, were hit hard as sovereign spreads widened, leading to further weakening.
In December 2014, Italian banks had a non-performing loan ratio of 17%. Today, that ratio stands at 1.9%, exactly in line with the European average. The restructuring of the banking sector was necessary, but it came at a cost to growth.
Since 2012, the country has been on a long deleveraging trajectory, with credit to the corporate sector declining rapidly relative to GDP. Covid interrupted that trend, largely because GDP declined strongly, while corporates also took on more debt. In recent years, inflation, combined with a sharp slowdown in corporate borrowing in 2023 and 2024, pushed the debt-to-GDP ratio down further.
Only now is that picture starting to change. Corporate credit is growing again, at 4.4%, roughly keeping pace with nominal economic growth. This is necessary in order to get corporate investment moving again.
Since 2012, Italy’s corporate sector has been deleveraging Credit to non-financial corporations, percentage of GDP Source: SBIS "> Source: SBIS The government’s debt is an inheritance, not a habit You will know the headline number: public debt at around 140% of GDP. But there's another number worth remembering. Since the introduction of the euro, Italy has run an annual primary deficit only five times, four of which occurred from 2020 to 2023, during and immediately after the Covid pandemic.
Looking ahead, Italy remains on a path of fiscal consolidation. The exception is a small fiscal push in 2027, reflecting the partial use of the national escape clause for energy and defence spending during a parliamentary election year. A country that runs primary surpluses typically has trouble keeping its infrastructure up to date, which has been noticeable in Italy.
However, Europe’s Resilience and Recovery Fund has helped turn the tide, triggering a new wave of investment focused on improving the safety of bridges, viaducts and tunnels as well as on additional rail infrastructure. It also included fibre and 5G networks, for example for high-speed internet for 10,000 schools. The Recovery Plan supported the growth outlook in three ways.
First, the scale of direct spending was large compared with other countries, at almost 11% of Italy’s 2019 GDP. And while the Plan may have expired at the end of June, the investments it funded are set to continue over the next couple of years. Second, the infrastructure created through those investments should support Italy’s potential growth well beyond the initial spending boost.
Third, the benefits could go beyond infrastructure. The Plan could also lift potential growth by improving how public funds are used and strengthening the public administration’s ability to manage and deliver projects. By June this year, the country was ahead of others in meeting the Plan’s milestones, at 72% versus 58%, including on justice reform, public administration, faster permitting and competition rules.
Much more money than you think Then there is another familiar feature of Italy: the stark divide between its richer and poorer regions. In some places the signs of poverty are hard to miss. But that tells only part of the story.
At the national level, the picture looks very different. Private wealth, at some €12 trillion, is high compared to other European countries. Much of that wealth is tied up in housing and other non-financial assets, which account for 54% of the total.
But a substantial 46% is held in financial assets. Compared to the total size of the economy, household wealth stood at the equivalent of 530% of GDP in 2024, compared to a eurozone average of some 450% of GDP. Italy may have a highly indebted public sector, but the strength of household balance sheets adds important nuance to the overall picture.
Average net household wealth in Italy is well above eurozone average Average household financial wealth (thousands of euros) Source: ECB "> Source: ECB Do not mistake old for obsolete Ancient Rome and Tuscany may shape Italy’s international image, but its economic heart lies in the north. Italy remains the second-biggest manufacturing powerhouse in the eurozone after Germany. Northern Italy, Switzerland, Austria, southern Germany and southeastern France are part of one of Europe’s densest belts of advanced manufacturing.
In this region, Italy specialises in machinery, robotics, precision engineering, automotive and pharmaceuticals. The industrial sector has been a key driver behind Italy's current account surplus since 2013 (with 2022 being an exception, due to high energy import costs). Quite a remarkable achievement for a country that used to have to depreciate its currency in order to remain competitive.
More recently, Italy’s export performance has strengthened, despite stagnant industrial production and weak demand across its traditional European markets. Goods exports increased by 5% in value in the first eight months of 2026, while the trade surplus widened to almost €35bn. Growth was driven primarily by markets outside the EU and by metal products, transport equipment and food.
Export gains were also geographically dispersed, with all major areas of the country recording growth in the first half. The picture is not uniformly positive: machinery exports remain weak, and part of the headline increase reflects prices, base effects and large individual transactions. Nevertheless, the results confirm the breadth of Italy's internationally competitive manufacturing base and its ability to redirect exports towards faster-growing non-European markets.
The new tricks up her sleeve When it comes to digital technology, Milan may not yet rank among Europe’s major data-centre hubs, but it is catching up fast. The region has added a significant amount of compute and is emerging as one of the markets where capacity is expanding , alongside the Nordics and Spain. It benefits from strong connectivity, with an internet exchange and access to a dense electricity network.
Everyone wants to be at her place Yes, tourism matters for Italy, accounting for around 11% of GDP, slightly above the European average of 10%. That dependence helps explain Italy’s particularly weak performance during Covid: it was hit early, in lockdown for longer, and suffered disproportionately from the collapse in travel. Since then, tourism has rebounded strongly and is likely to continue outpacing the wider economy as Europe’s ageing population has both the time and money to travel.
It may not be a productivity engine, but it remains an important part of Italy’s economic mix. More can be done to deal with ageing Italy is a rapidly ageing society. As elsewhere in Europe, this requires increasing labour participation, upgrading the quality of the labour force and finding more efficient ways to produce.
On the latter two, there is upside potential, admittedly a glass-half-full view. Italy has a large share of workers in SMEs, limiting the benefits of economies of scale. As entrepreneurs age, retirement could provide a natural moment for consolidation, allowing businesses to join forces and become more efficient.
But regulation often favours smaller companies, with labour laws becoming stricter as firms grow. Reforms could make it more attractive for companies to scale up and unlock greater efficiencies. There is also plenty of upside in upgrading Italy’s labour force.
While secondary education is around the European average, tertiary attainment is exceptionally low: only 31% of young people hold a tertiary qualification, compared with 44% across Europe. Raising educational attainment will be essential for future growth, while the lower education levels of the existing workforce make lifelong learning equally important. AI could help on both fronts, supporting learning and helping SMEs bridge skills gaps .
There is considerable room for AI adoption to grow: at 31%, Italy lags behind countries like France and Spain . And that productivity problem? We’ve identified three factors that help explain Italy’s weak productivity growth: a strong increase in labour participation, balance-sheet restructuring and a relatively strong hit from Covid.
In other words, past performance partly reflects conditions that were hardly conducive to a productivity catch-up. Relative to other eurozone economies, there may also be an important measurement nuance. The conventional narrative is that Italy has suffered a substantial and persistent loss of productivity relative to Germany and France.
However, output-side estimates based on purchasing power parity suggest that some of the apparent relative deterioration since the mid-2000s may instead reflect differences in how prices and quality are measured. Italy’s national deflators may have been high, underestimating quality improvements and therefore productivity improvements. Neither observation points to an Italian productivity miracle, but both add important nuance.
It is too early to conclude that Italian companies are simply unable to improve their productivity. The strength of history The familiar images of pasta, family meals, gorgeous coastal towns and ancient ruins can obscure how much Italy has changed. So too can the image of an economy stuck in permanent standstill.
Italy isn’t suddenly young. It hasn’t shed its public debt or become a poster child for institutional reform. But Europe’s Nonna has changed more than her reputation suggests.
More women and older people are working, the banking system has been repaired, private balance sheets are solid and the industrial base remains formidable. Looking ahead, data centres, tourism, education and business consolidation all offer further opportunities. This may not be an Italian miracle.
But Nonna is an old master, so never rule out a renaissance. Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument.
Read more Italy GDP Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download In this opinion Nonna’s at work The foundation of the house has been put in order The government’s debt is an inheritance, not a habit Much more money than you think Do not mistake old for obsolete The new tricks up her sleeve Everyone wants to be at her place More can be done to deal with ageing And that productivity problem? The strength of history Authors Marieke Blom Chief Economist and Global Head of Research Marieke Blom is Chief Economist and Global Head of Research at ING Group. Marieke has worked at ING since 2014.
She is a member of the board of the Dutch Royal Economic Society (KVS). She is also a… Paolo Pizzoli Senior Economist, Italy, Greece Paolo Pizzoli is a senior economist covering Italy and Greece. He joined the firm in 1997 after working at Banca Akros, Banca Euromobiliare, ENI, and Prometeia.
Paolo studied at the University of…
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