Rome gloats as France becomes Italy and Italy becomes France

illuminem summarises for you the essential news of the day. Read the full piece on POLITICO or enjoy below:

🗞️ Driving the news: France is facing mounting political and fiscal instability, with five prime ministers in under two years and a ballooning public debt
• Meanwhile, Italy — historically seen as the EU’s political wildcard — is experiencing an unusual period of stability under Prime Minister Giorgia Meloni
• Italian officials are openly contrasting their government’s fiscal discipline and coherence with France’s current turmoil, positioning Rome as the more reliable player in European politics

🔭 The context: French President Emmanuel Macron has struggled to form a stable government following the 2024 snap elections, which resulted in a hung parliament
• By contrast, Meloni’s right-wing coalition, once considered a threat to EU norms, has consolidated power and improved fiscal discipline
• Both countries carry over €3 trillion in public debt, but France's deficit is projected at 5.4% of GDP this year, compared to Italy’s 3.3%
• For the first time, Italian and French 10-year bond yields have converged at 3.49%, reflecting growing investor concern over France’s outlook

🌍 Why it matters for the planet: Political stability and fiscal credibility are key enablers of effective climate and sustainability policy
• France’s weakened governance could stall critical green reforms, while Italy’s improved standing may enhance its ability to influence EU climate negotiations and funding priorities
• However, Italy’s rise under a far-right coalition raises questions about the consistency and ambition of its long-term sustainability commitments

⏭️ What's next: France’s new Prime Minister Sébastien Lecornu must secure a majority to pass a credible budget or risk further downgrades in market confidence
• Italy, buoyed by a Fitch credit rating upgrade and EU-level influence, is set to meet the bloc’s 3% deficit threshold by 2026
• As both countries navigate political and fiscal challenges, their trajectories will shape upcoming EU fiscal reform talks, green funding debates, and the balance of power ahead of the 2027 French presidential elections

💬 One quote: “Evidently, the policies pushed by Macron’s governments are the wrong policies,” – Nicola Procaccini, MEP and Meloni ally.

📈 One stat: 3.49% – The equal yield on 10-year French and Italian government bonds, reflecting a rare convergence in perceived fiscal risk between the two economies

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