Over-indebtedness of Italians: a social as well as an economic phenomenon
3' min read
3' min read
The main indicators agree in showing a rise in over-indebtedness situations in Italy as well. To grasp the significance of the phenomenon, it is useful to refer to data on the wealth, inequality and indebtedness of Italian households, reported in the recent Bank of Italy Annual Report presented
last 31 May.
Using Distributional wealth wccounts (Dwa) data, i.e. statistics on wealth distribution published by the ECB for the first time in early 2024, and dividing Italian households into three classes on the basis of net wealth distribution, Banca d'Italia estimates that in 2023 the wealthiest 10% held 60% of total net wealth, while the less affluent half held only 7%. This is clear evidence of the strong polarisation in the distribution of wealth in Italy. A gap that has grown over time: compared to 2010, the share held by the richest tenth increased by about 7%, mainly at the expense of the middle class. This is also confirmed by the Gini index of net wealth, an approximation of the degree of inequality of its distribution, which showed an increase in concentration between 2010 and 2016 (growing from 67% to 71%), then settling. The indicator shows that the level of inequality in Italy is currently in line with that of the euro area and France, higher than that of Spain and lower than that of Germany.
In light of the tightening of monetary policy and the new forms of credit enabled by technology (such as buy now pay later), over-indebtedness deserves special attention. A clarification must be made here: there is no single, objective definition of over-indebtedness. It is a multifaceted phenomenon, difficult to bring to light and not easy to intercept. However, the assumption applies to all that if the accumulation of debts is greater than income, the ability to meet commitments is highly at risk. Several categories of metrics can be used to identify over-indebtedness situations. A first category of proxy relates to debt servicing costs, qualifying an over-indebtedness situation when households spend more than 30%
(or 50%) of their gross monthly income to repay their debt or fall below the poverty line. A second category concerns late payments, with more than two months in arrears on instalment repayments
or utility payments. A third category concerns the number of credit lines, four or more.
According to elaborations on the data of the Centrale dei Rischi contained in the Annual Report of the Bank of Italy, in 2023 there were about 127,000 households in arrears on at least one instalment of a variable-rate mortgage, i.e. 0.5 per cent of the total number of Italian households and 8.1 per cent of those with such debt. Estimates also indicate that about 198,000 households had to bear an instalment exceeding 30% of their income between 2023 and May 2024. These households represent 1.2 and 0.8 per cent of all Italian households, respectively. The probability of encountering difficulties in repaying instalments as a result of rising rates is higher for households with multiple lines of debt, while it is lower for those residing in the South.
In an economic context that is stagnating and with incomes tending to decline, debts can become a noose, if not a noose, for the most vulnerable households with implications not only economic but also social. They can, that is, become a disruptive social factor.
