Slow growth, street protests and a budget under pressure

Thousands of students and workers marched across Italy on Friday in a general strike called by the left-wing Unione Sindacale di Base trade union, according to Euronews and France 24. Protesters in Rome, Turin and other cities demanded relief from rising living costs, more funding for schools and a reversal of what demonstrators described as excessive defence spending. Minor clashes were reported in Turin, where police maintained a heavy presence throughout the day.

The protests arrived at a moment when the underlying economic data offer limited comfort to either side of the argument. GDP growth for 2025 came in at 0.54 percent, according to figures in the ECB and World Bank data available to this desk — a rate that leaves little room for significant new public expenditure without adding to borrowing costs. For ordinary households, that pace of expansion means incomes are rising slowly if at all in real terms.

Inflation, at 1.53 percent in 2025, is running well below the ECB's two-percent target, which might ordinarily be read as good news. In practice, however, it reflects weak domestic demand rather than price stability achieved through productivity gains — a distinction that matters when workers are asking why their purchasing power has not recovered more visibly since the post-pandemic price surge.

The euro's trajectory adds a further layer of complexity. Against the dollar, the single currency slipped from 1.1298 on 1 October to 1.1172 by 30 October — a decline of roughly one percentage point over the month. A softer euro raises the cost of energy and commodities priced in dollars, a burden felt most acutely by Italian manufacturers and by households paying utility bills. Against sterling and the Swiss franc, the euro also traded at levels — 0.8338 and 0.9194 respectively — that reflect continued uncertainty about the eurozone's near-term growth outlook.

The Local Italy reported this week that Italy's draft 2027 budget contains an income-tax cut for some higher earners and an extension to parental-leave allowances, among eight measures that directly affect foreign residents. The combination of a targeted tax reduction at the upper end of the income scale and relatively modest social provisions is precisely what the USB and allied groups say misaligns government priorities — a charge the government disputes, arguing that incentives for higher earners are designed to retain talent and attract foreign investment.

Unemployment, at 6.39 percent in 2025, is low by Italy's historical standards, yet the figure conceals persistent structural weaknesses: a youth unemployment rate that foreign correspondents have long noted runs far higher than the headline number, and a participation rate — particularly among women in the south — that keeps many people outside the measured labour force altogether. The protesters on Friday included a significant contingent of university students, a group whose economic prospects remain closely tied to whether Italy can sustain even modest growth.

The draft budget now faces what The Local Italy described as a difficult passage through parliament. With the Chamber of Deputies and the Senate both required to approve the text before the year-end deadline, and with opposition parties energised by Friday's turnout, the government will need to demonstrate that its fiscal arithmetic holds together — a task made harder by a bond market that watches Italy's debt dynamics closely. The spread between Italian and German sovereign yields remains a barometer that international investors and the ECB monitor as a proxy for political and fiscal risk.

Taken together, the data and the street scenes of 31 October point to an economy that is neither in crisis nor in confident recovery. Growth is positive but thin, inflation is contained, and unemployment is at a multi-year low — yet none of those facts has translated into the sense of material improvement that would quiet the crowds. How the government navigates the budget debate in the weeks ahead will determine whether that gap between the statistics and the lived experience begins, at last, to narrow.