How much is the Italian public debt worth? Although our public debate cannot ignore this information, it is often difficult to "visualize" such large figures. With this "clock", Istituto Bruno Leoni wishes to make accessible to all the humongous size of our public debt, with the aim of providing and indirect measure of both the irresponsibility of our political class and the objective constraints of public finance to which our country must submit.

The clock updates every 3 seconds our estimate of the stock of debt, which is based on - and is continuously corrected with - the monthly reports of the Bank of Italy. In this way, we want to help citizens understand what is meant when we say that we are burdened with a debt equal to some 132% of gross domestic product. To make the concept even clearer, just consider that this 13-digit debt (value referred to the end of 2014) is equivalent to about 35 thousand euros for each Italian, including infants and over 100s. In 2014, on average, the debt grew by an amount equal to about 2,100 euros every second, more than the average family earns in a month.

The debt clock provides an estimate of the stock of Italian public debt in real time. The starting point is data provided by the Bank of Italy. Since the data released refers to two months earlier, our debt clock estimates the amount for subsequent months based on historical data. It is therefore a forecast, and as such, subject to possible measurement/forecasting errors.

1. What are the risks entailed by a high public debt?
A high ratio of public debt to gross domestic product, especially in countries with low growth rates, makes financing public spending a more difficult endeavour; quite evidently, interest payments increases. In addition, under these conditions the risk of market volatility is higher.
This can be caused by external shocks: when events occur that change the market actors’ perception of risks (financial crises, terrorist or other attacks, the emergence of disruptive technologies), the countries that have a very high debt are in greater difficulty, more exposed to the storm.
Otherwise, disruptions may be due to a crisis of confidence in the "fundamentals" of the country itself: namely, the many issues that should be addressed by the "structural reforms" we so tirelessly call for.

In either case, interest rates may rise: thus, the debt becomes more expensive to finance and its servicing diverts further resources from the public budget. In extreme cases, interest rates can be so high as to become unsustainable to the point of causing the need for a bailout by other countries or international institutions (such as the International Monetary Fund), with entail the imposition of checks or conditions, or even an outright sovereign bankruptcy.
In the latter case, debt securities no longer yield the returns expected by the entities who hold them; "domestic" creditors (people who own government securities) tend to be penalized even more than foreign ones; the government finds that paying salaries and pensions is harder. But private sector companies are also suffering, because to some extent their access to credit is also linked to the credibility of their country.

2. There are nations with a high public debt where everything seems to be going well, Japan or the US, for example; why can't we do the same?
We are talking about very different economies, with levels of productivity, innovation and growth rates very different from ours; although highly indebted, their economic fundamentals are such that they can finance their debt at low cost. Italy is a country in demographic decline and has not experienced robust economic growth for years; productivity stagnates and the high level of existing debt drains substantial resources (over 60 billion euros per year). In addition, the country's growth rates are modest, even in the expansionary phases of the economic cycle. This means that the markets (our "creditors") perceive a greater risk.

3. "Public debt is matched by private credit" of those who have purchased government bonds. What's wrong with that? Don't the two things offset each other?
Certainly: to every debt corresponds a credit, and to every debtor corresponds a creditor. In the case of public debt, the debtor is the State while the creditors are all those - families and financial institutions, both Italian and foreign - who have purchased public debt securities. Exactly as in the private sector, if the debtor is unable to repay its debts, the creditor will lose part or all of what is owed to it. Consequently, if the state is unable to repay the debt, it will be the citizens who will pay for it twice: first as savers, and then as taxpayers. A state that does not pay its debts loses access to financial markets: it is difficult to find someone who will lend it money, and those who do demand a very high interest rate. For this reason, it is highly probable that this state will have to implement very harsh policies: drastically decreasing its own spending (for example, its employees' salaries or pensions) or raising taxes.

4. Would it not be sufficient to return to a "sovereign currency" to eliminate the debt problem? Would it not then be possible to refinance it indefinitely?
If Italy were to leave the Euro, the "denomination risk" of public debt would become a certainty. In other words, the old government bonds would be converted into Lire. The value of those bonds would collapse, with serious losses for those who hold them (including savers).
It is true that once out of the Euro area those bonds could be purchased by the Bank of Italy; but this would quickly increase the amount of the new national currency in circulation, reducing its value. This would start a path towards hyper-inflation that would soon have to be stopped with a strong monetary and budgetary squeeze: the opposite of the declared objective of the exit from the Eurozone.
High inflation, in fact, certainly lightens the burden of the debt, but also implies a reduction in the purchasing power of wages, with particularly serious effects for workers with low incomes.
It is too often forgotten that Italy has experienced years of hyperinflation and that only the firm resolution to separate fiscal policy choices from monetary policy decisions (the so-called "Treasury-Bankitalia divorce") have enabled our country to set on a path of credibility that has allowed us to drastically decrease inflation and enter a common monetary area with other countries.