Italy's finance chief says Rome's biggest problem is investor confidence

  • Since the anti-establishment government came into power last June, concerns have risen about Italy's ability to repay its debts.
  • This is because the coalition government has increased public spending and Rome is already dealing with the second highest debt pile in the euro area – at about 130 percent of debt- to-GDP.
ROME, ITALY - JULY 24: Minister of Economy Giovanni Tria attends a press conference.
Simona Granati | Corbis News | Getty Images
ROME, ITALY - JULY 24: Minister of Economy Giovanni Tria attends a press conference.

Investor confidence is the biggest problem that Italy is facing, the country's finance minister told Class-CNBC Monday.

The euro zone's third largest economy has struggled to convince investors that it is on a sustainable fiscal path. Since the anti-establishment government came into power last June, concerns have risen about Italy's ability to repay its debts.

This is because the coalition government has increased public spending and Rome is already dealing with the second highest debt pile in the euro area – at about 130 percent of debt- to-GDP.

These concerns have been mirrored into rising yields on Italian government debt – the higher the yield, the riskier the investment is perceived. For instance, the yield on the 10-year Italian paper peaked last May from below 2 percent to about 3 percent in a matter of days, on the back of the possibility that two anti-establishment parties were about to take power. The same yield is now trading at about 2.7 percent – still one of the highest in the euro area.

"I think investor confidence is Italy's biggest problem. But confidence can be restored," Giovanni Tria, Italy's finance minister told CNBC.

"I see a lot of international appreciation for Italy's industrial system and for our economy. We need to boost our own domestic morale even in the shot-term, but I think that our basis is very strong," Tria, who is a technocrat and not a member of any of the coalition parties, said.

Data from the Ifo Institute showed last month that investor sentiment in the 19 member region dropped to its lowest level in more than four years. Out of eight euro zone countries analyzed, Italy registered the weakest level of economic climate.

The numbers point to a tough ride ahead for Italy, especially after Rome fell into recession in the last quarter of 2018.