20 Euro – Italy

In 2023, Italy's currency situation was firmly within the framework of the Eurozone, with the euro (EUR) serving as the sole legal tender. As the third-largest economy in the Eurozone, Italy's monetary policy was set by the European Central Bank (ECB), which embarked on an aggressive tightening cycle to combat high inflation. Throughout the year, the ECB raised key interest rates multiple times, a move that strengthened the euro against other major currencies like the US dollar but also increased borrowing costs for the Italian government, businesses, and households.

Domestically, the currency dynamic was heavily influenced by Italy's significant public debt, which exceeded 140% of GDP. The rising interest rates elevated concerns about debt sustainability and widened the spread between Italian and German 10-year government bonds (the BTP-Bund spread), a key indicator of perceived risk in Italian sovereign debt. This financial pressure was managed under Prime Minister Giorgia Meloni's right-wing coalition government, which navigated between EU fiscal rules and promises of tax cuts and increased spending, all while the strong euro had a mixed impact on the export-oriented manufacturing sector.

Looking forward, the currency and economic outlook remained tightly linked to ECB policy decisions and Italy's ability to maintain fiscal discipline to access EU pandemic recovery funds. While the euro's stability provided macroeconomic benefits, the high debt burden under a regime of elevated interest rates posed a persistent challenge, making economic growth essential for stabilizing the country's financial position within the single currency area.