Italy's 'merciless' demographic crisis is a spur to action, economy minister says

By Giuseppe Fonte and Alvise Armellini

ROME (Reuters) -Italy's ageing population and low birth rate are among the main challenges for the euro zone's third largest economy, Finance Minister Giancarlo Giorgetti said on Wednesday, highlighting the potential risks for the country's shaky public finances.

Births in Italy, the EU's third most populous country with a total population of nearly 59 million, hit a record low of some 370,000 in 2024. The fertility rate has slumped to 1.18, below an EU average of 1.38 in 2023, and far below the 2.1 needed for a steady population.

"Italy is ageing, birth rates are falling, entire areas of the country are emptying. These merciless numbers must become a spur to action," Giorgetti said, addressing a parliamentary committee on the demographic crisis.

Giorgetti highlighted what Meloni's government has done since it took office in late 2022 to help women have children, including tax breaks to allow them to keep on working and he said Rome would continue to move along this path.

He said the demographic trend would put "significant pressure" on pension, health and long-term care spending, with a smaller workforce supporting growing numbers of pensioners.

"The greatest effects are expected in the first half of the 2040s, when the generations of so-called baby-boomers will have left the labour force."

Pensions already eat up more than 15% of GDP in Italy, and the government expects spending to reach 17% of output in 2042.

Italy's public debt, already the second-highest in the euro zone after Greece, is expected to rise to almost 137.6% of gross domestic product in 2026 from 135.3% last year, based on the government's latest projections, before edging down to 137.4% in 2027.

Giorgetti also said a shrinking population and mild inflation trends had allowed Italy's per capita GDP, measured at purchasing power parity, to catch up with that of France and reduce the gap with Germany.

"This is not a comforting figure, as it is certainly indicative of the ongoing demographic decline," the minister said. "But it can nevertheless be read in a favourable light, considering that more resources have been generated for each Italian in the face of a falling population."

(Editing by Jane Merriman)