Duomo, Milan - Source: TFR.
On 8 October 2026, the Italian Chamber of Deputies gave final approval to the Stabilicum by secret ballot, 227 votes to 164. The controversial electoral law, pushed by Giorgia Meloni’s governing coalition, had dominated the political debate in the country since its filing in late February. The centre-right has presented it as a necessary cure against chronic instability that has been plaguing Italy since the foundation of the republic after World War Two, with the country having 68 governments since 1946. All opposition parties in parliament declared against it, on both ends of the political spectrum in Italy, left and right, with some arguing it was a critical threat to democracy.
The law establishes a 70-deputy and 35-senator bonus for the first-placed party, or coalition, that manages to secure 42% of the vote in both chambers, with seats allocated through a purely proportional system if all fail to meet this benchmark. The bonus is capped: the winner can’t hold more than 220 seats in the Chamber of Deputies and 113 seats in the Senate, enough for a 55% majority in the Chamber of Deputies, and 56.5% in the Senate. Each party still needs 3% to enter parliament, 10% for coalitions. Voters can now express up to three preferences from a list of six names, compared with the blocked party lists the old law offered, but each list will be headed by a party-chosen leader who is elected first, with the rule guaranteeing that 40% of those leaders are women removed. Furthermore, coalitions must name their candidate for prime minister, though the name will not appear on the ballot.
When the proposal for the law was filed in late February, the arithmetic clearly favoured its authors. A week earlier, Meloni’s governing coalition of Fratelli D’Italia (FdI), Forza Italia (FI), the Lega and Noi Moderati (NM) polled at about 46.6% (YouTrend/Agi polling average), comfortably above the threshold they had set. The centre-left “Campo Largo” coalition of Partito Democratico (PD), Movimento Cinque Stelle (M5S), Alleanza Verdi e Sinistra (AVS), Italia Viva and +Europa trailed at about 44.3% in the same poll. A centre-right victory in 2027 seemed so likely that the economist Lorenzo Codogno later recalled it looked almost certain. Eight months later, the roles had reversed. On 1 October, the Campo Largo led with 43.4% while the governing coalition had lost 5.5 points to 41.1%, below the 42% bar it had set for itself. Much of those votes went to Futuro Nazionale, a party founded by the former general Roberto Vannacci after leaving the Lega in February, which now polls at 7.2%, effectively splitting the right-wing vote. Recently, the governing coalition has risen back above the threshold with the inclusion of Cateno De Luca’s Sud Chiama Nord on 12 October 2026, reaching 42.4% in an SWG published the same day. In the most recent polls, the Campo Largo sits at 43.1%, the governing coalition at 42.9%.
Neither bloc is safely above 42%. Campo Largo crosses the line only with its two smallest parties, but the coalition is still undecided on a leader, which the new law requires. The centre-right barely clears it and is still in second place without Vannacci, whose party Meloni has refused to take on. If both fall short, the Stabilicum would hand Italy its first purely proportional parliament since 1992, leaving it in a situation similar to France, where no bloc in parliament holds a clear majority. This would reverse a recent trend, in which the country has enjoyed a period of particular stability, with Meloni’s government the longest in the history of republican Italy. This begs the question: what would happen to Italy without its current stability?
On 21 November 2025, Moody’s raised Italy’s rating from Baa3 to Baa2, its first upgrade of the country in 23 years, citing “a consistent track record of political and policy stability”, and it was the last in a year of upgrades. S&P had raised its rating from BBB to BBB+ on 11 April 2025; Fitch followed, with its first upgrade since 2021, from BBB to BBB+ on 19 September 2025; Morningstar DBRS lifted it from BBB(high) to A(low) on 17 October 2025. In seven months, all four major agencies had raised their verdict on Italy, three of them citing the stability of its government. This was a financial win for Italy. The BTP-Bund spread fell from 115bp at the start of 2025 to 65 by the end of the year, with the interest bill held at 3.9% of GDP even as debt grew. Some of those gains have been lost: the ECB rate hikes and an energy shock have pushed the ten-year yield on Italian bonds to 4.7%, the highest level since 2022, and the spread has risen back over 100. Yet, Italy again borrows more cheaply than France, paying 4.54% on ten-year debt on 9 October 2026, against France’s 4.83%.
This is mainly due to credibility: a stable democratic government can credibly reassure investors that it will meet its goals because it has the votes to pass the legislation to do so. At the moment, the market is doubting France’s credibility. Three parliamentary blocs, none commanding a majority, have led to a minority government tackling an expected 5.4% deficit in 2026; without new cuts, French Prime Minister Sébastien Lecornu warns the deficit could reach 6.5% in 2027. Lecornu already has a €54 billion plan to push it to 5% in 2027; however, the two largest opposition forces, the left and Rassemblement National, are likely to oppose it. Both are pushing for policies that economists say would widen the deficit, and with the recent protests in France, further cuts, six months before a presidential election, have become politically toxic due to the country being caught in a cost of living crisis. Agencies saw it coming. Moody’s downgraded France’s ratings on 14 December 2024, citing that the country’s political fragmentation would likely impede fiscal consolidation. All the other agencies followed in downgrading France, stating similar reasons.
Italy has gone in the opposite direction. When Meloni took office in late October 2022, she inherited an Italian deficit at 8.1% from the previous government, according to Istat’s latest figure; today's forecasts for 2026 put it at 2.9%. If the forecasts hold, Italy will bring its deficit below the EU’s 3% for the first time since 2019, though the government plans for it to rise to 3.4% in 2027 to fund energy and defence spending under an EU escape clause. While this would not fix Italy’s overall economic problems, it would give the country breathing room to tackle some of them. The first and most evident benefit would be an exit from the EU’s excessive deficit procedure, first opened in 2024, which, if forecasts are correct, could be closed in 2027, removing Brussels’ minimum annual correction requirements of 0.5% of GDP, alleviating Italy’s need for constant budget cuts. The second benefit would strengthen Italy’s qualification for the Transmission Protection Instrument, allowing the ECB to buy an unlimited amount of the country’s bonds if spreads were to ever rise in a way it deemed unwarranted and disorderly, even beyond what fundamentals justify. The third and final benefit would be continued favourability with rating agencies, with all four that were previously cited confirming their upgrades in every review in 2026. S&P in particular raised its outlook in its January review, its first positive outlook on Italy since 2017, citing the country’s fiscal resilience and expected decline in the debt ratio after 2027-2028. A further upgrade into the A band by the agency is assumed by a UBS fund manager in 2027, and the IMF’s latest figures seem to support these conditions: the debt ratio is forecast to peak in 2027 at 138.8% of GDP, then gradually fall to 136.1% by 2031. While this is all good news for a country traditionally known for its economic troubles, this fiscal future is far from guaranteed, as all agencies have been clear that it rests on continued performance by Italy, and the credibility that the country will meet these goals rests on stability.
While stability has brought the country some wins, there are things it did not buy. Italy’s economy grew by just 0.6% of GDP in 2025, according to Istat’s estimates, and it has consistently slowed since 2023, the first full year Meloni was in office. This and next year seem to confirm this trend: the Eurosystem’s June projections put Italian GDP growth at 0.5% in 2026, among the slowest in the Eurozone, and 0.4% in 2027, placing the country dead last among the 21 members. Istat’s more optimistic forecast puts growth at 0.7% for both years, still leaving Italy near the bottom. This could affect even the fiscal wins, with DRBS warning that persistently weak growth continues to limit its rating. The outlook isn’t looking too bright. Manufacturing is slowly contracting, falling 3.4% in 2024, 1.4% in 2025, and 1.3% in August 2026, a trend exacerbated by the energy crisis.
The labour market tells a more mixed story. The employment rate has risen by 2.5 points during Meloni’s tenure; however, the increment hasn’t been distributed equally. Most of the growth is concentrated in the over-50 age group, which has captured 89% of the total job growth since 2022: 1.367 million jobs out of the 1.53 million added. Below 50, jobs have actually decreased. From December 2022 to August 2026, the 15-24 age range has lost 180 thousand jobs, a -15.3% contraction, minus 216 thousand for the 35-49 group, -2.5%, with the only age range gaining in this labour market being the 25-34 group, with 167 thousand jobs, a +4.1% increase. When taken as a whole, jobs for the under-50s have contracted by 229 thousand, a -1.6% reduction. Meanwhile, productivity has fallen for three years in a row, for a total of about -4% of value added per hour worked, from 2023 to 2025. To top it all off, Italy is still suffering a massive brain drain, with a net loss of 189 thousand Italian citizens from 2023 to 2025, and an additional 58 thousand from January to June of 2026. This is accompanied by a demographic crisis, with a natural balance of -296 thousand in 2025, offset only by net migration of the same number, and a fertility rate of 1.14 per woman in 2025, a decrease from 1.18 in 2024, which was at the time the fifth lowest in the EU.
Stability has given the government time to tackle these issues; yet, as S&P put it in 2025, the centre-right’s attention seemed more focused on institutional reform than on economic modernisation. Since Meloni’s government took office, it has proposed four major institutional reforms; only one, the Stabilicum, has been passed intact. The first reform, the regional autonomy bill, became law in June 2024; however, since then it has been largely gutted by the Constitutional Court; the second, the Premierato, has stalled in the Chamber of Deputies and Meloni has stated it would likely slip to the next legislature; the third and most recent was rejected in a popular referendum that ended 53.74% to 46.26%, Meloni’s greatest defeat. Meanwhile, the rating agencies are not only demanding economic reforms; Brussels, too, keeps requesting changes on productivity, women’s employment, and investment in the South; the Italian government has barely moved on these issues.
While these problems are all serious constraints for Italy, they can’t purely be blamed on Meloni’s government, as these issues have plagued most 21st-century Italian governments. Stability has eased some of the pressure on the overall economic problems with the centre-right’s fiscal wins, and given France’s situation as a warning, stability may seem like the path to follow. Spain is the obvious objection to such a statement. The parliamentary situation in the country is similar to France: many blocs, no single coalition controlling the chamber, with a government ruling in the minority. Unlike France, however, its government can’t be easily toppled, with no-confidence motions having the obligation to name a replacement with an absolute majority, allowing Spain to have continuity in government at a time of parliamentary fragmentation. Despite all of this, in recent years, it has had remarkable fiscal and economic results, beating Italy in almost all topics that this article has taken a look at so far. Spain, from 2023 to 2025, has brought the deficit down from 3.5% to 2.4%, with it expected to reach 2% in 2026. The debt-to-GDP ratio has been falling too, contracting by 4.4 percentage points since 2023; however, overall debt in terms of euros has been rising, with €123bn of new debt being added between 2023 and 2025. What has made the ratio fall is the strongest cumulative growth among the EU’s large economies, a growth of 8.9% in the period of 2023-2025, against Italy’s 2.3%. The unemployment rate in both countries has fallen by about the same amount, with Spain having a slight advantage with a 1.7 point reduction against Italy’s 1.6; however, productivity has increased in Spain, while in Italy it has fallen. Rating agencies have rewarded Spanish results, with S&P upgrading it from A to A+, Moody’s from Baa1 to A3, and Fitch from A- to A, and this is just in 2025.
Despite having the majority in both chambers of parliament, Meloni’s government hasn’t achieved economic modernization, nor has it pushed hard for it. Given Spain’s example, is stability necessary for Italy to grow? It is, but it isn’t the only condition. Spain has a deadlocked legislature; however, it has continuity in two elements. First, in leadership, the prime minister rules in a minority, but the mere difficulty of removing Pedro Sànchez secures his position. Now that may change with the snap election on 29 November 2026, yet for now it remains so. This gives Spain a predictable direction it will follow, one that investors, analysts and rating agencies trust for now. The Italian system for a prime minister is much closer to the French, meaning a government without a strong coalition backing it is much more fragile, and Italy, unlike France, does not have a president with an executive mandate, leaving it more exposed to vacuums left by constantly changing governments. This exact issue has been plaguing Italy’s republic since its founding, with governments before Meloni lasting 416 days on average since World War 2, the shortest in Europe; this is the situation that Stabilicum was designed to address. The second element of continuity is budget: if Spain's parliament cannot agree on a budget, which is what has happened since 2022, the one from the previous year is applied, allowing Spain to keep spending to maintain the State even during a deadlocked legislature. Italy, much like France, does not have this option; the budget must be approved each time it’s proposed, and while provisional budgets that run for four months are allowed, Italy hasn’t run on one since 1988, as it is viewed as a sign of fiscal instability.
The next Italian legislative elections are expected for the autumn of 2027, meaning if the parliament were to be hung, it would have only weeks to form a government and pass a budget, meaning Italy could risk its first provisional budget in decades. And this leads us to the major reason why Italy needs stability: the cost of debt. In 2025, both Spain and Italy were the subject of upgrades by rating agencies; however, it was for very different reasons: the former because of growth, the latter because of stability. Spain can afford political instability not only because it has tools to manage it, but because worries about its stability are offset by growth, meaning the cost of its debt is likely to remain manageable as long as current conditions persist. Italy’s borrowing costs have fallen because a stable government has given the country credibility with investors. In Italy, with a debt-to-GDP ratio of 137%, credibility is worth billions, as every 100 points added to the spread adds another €10bn a year in interest over three years. The BTP-Bund spread has historically been high in times of political uncertainty, with it being at around 230bp when Mario Draghi’s government fell in 2022; today, exacerbated again by an energy crisis and potential ECB rate hikes, political instability could push it to heights Italy hasn’t seen in recent years. The rating agencies favouring Italy is a recent trend, one that can be easily reversed if the conditions that brought such favour are undone.
Until now, this article has looked at this subject from a macro-economic perspective; if we zoom in, we begin to see the effects of this on the Italian people. According to the Bank of Italy, every 100bp rise on the spread adds 0.3 points on new mortgage rates and up to 0.7 to business loans, with lending expected to slow with the rise of spread. This is due to banks holding a large amount of Italian bonds, so when prices fall, so does their capital, with every 100bp rise cutting a bank’s core capital ratio by 0.4 points, reducing their ability to lend. This would mean dearer credit, lowering already weak investment by firms, especially in industry, costing Italians further jobs, and these are not even the worst consequences. To pay the extra €10 billion mentioned earlier, any future government would have to make cuts in other areas, most likely in the already strained Italian welfare system, meaning providing less services to Italians, or higher taxes without getting anything new in return, or by further privatizations of state assets, costing the country future incomes.
Stability has been Italy’s shield. It has kept borrowing costs down in a country with the second highest debt to GDP ratio in the EU, which together with fiscal prudence by pushing the deficit down, has bought the country the credibility with rating agencies, whom have responded by rewarding it with upgrades. But a shield protects, it does not build. In four years the most stable government in the Republic’s history has delivered meagre economic results: GDP growth has slowed every year, output per hour has fallen by about 4%, almost all new jobs have gone to the over 50s, meanwhile young people, many with university degrees, have kept leaving. Spain shows what Italy lacks, another layer of protection. Its parliament is deadlocked, its government hasn’t managed to pass a budget since 2022, yet its economy grew, its debt ratio fell, and the agencies upgraded the country the same year they did Italy. Growth is the second layer of protection Italy needs, as when politics falter, it keeps the debt manageable and investors calm, giving the country crucial breathing room to handle crises. Without it, with today’s metrics, Italy by suffering a political crisis could get uncomfortably close to France.
This is why the Stabilicum matters, and why it is not enough. With it Italy has hedged the risk of political fragmentation, however who governs after the next elections, left or right, will inherit the same economic problems, and solving them will take a government which has the votes and the will to tackle them. Continued stability will give Italy time, but it will not secure its future, and an hung parliament would make that task almost impossible as a government formed in weeks, under a constitutional deadline to pass a budget will only have time to survive, and the country may not survive with it. The next election will decide if Italy has the time to live.