ECB’s Panetta: Italian Economy Weaker Due to Geopolitical Tensions, Subdued Domestic Demand

15 January 2026

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Fabio Panetta said on Thursday that Italy’s economic growth had softened in recent months, driven mainly by geopolitical and trade tensions alongside weak domestic demand, adding that forecasts pointed to only a modest expansion in the years ahead.

Speaking at the University of Messina, Panetta said that Italy’s recent economic resilience had exceeded expectations, highlighting that growth between 2020 and 2024 outpaced that of the previous decade and broadly matched the euro area average.

“Employment has now reached its highest levels ever, and the labor market participation rate has increased significantly,” he said. “The banking system, which only ten years ago was a factor of vulnerability, is now generally sound, well capitalized, and profitable.”

Despite these improvements, Panetta said Italy’s growth momentum had recently weakened, mirroring trends across much of Europe. He attributed this slowdown to declining exports amid geopolitical and trade frictions, as well as subdued domestic demand.

“Medium-term forecasts – including those of the government and leading analysts – point to modest growth in the coming years and bring the structural weaknesses of the Italian economy back to the fore,” he said.

Panetta also pointed to demographic challenges, warning that population aging, if not offset by stronger productivity gains, would lead to a decline in GDP.