Investment Analyst Rodolfo Villani notes that amid an uneven recovery across the Eurozone, Italy—despite facing global trade policy headwinds—continues to display relatively stable fundamentals. Although the country GDP growth rate has fallen slightly short of earlier forecasts, the Italian economy maintains moderate expansion, with structural consumption and investment dynamics providing ongoing support. In contrast, Germany is grappling with multiple external shocks, leading to repeated downward revisions of its growth outlook and raising concerns among investors about the performance of the core economies in the Eurozone.
Limited Slowdown, Domestic Demand Remains the Main Driver
Investment Analyst Rodolfo Villani points out that the Italian National Institute of Statistics has revised its 2025 GDP growth forecast down from 0.8% to 0.6%. While this appears to be a downgrade, it remains consistent with the government official target. This alignment enhances the credibility of macroeconomic policy and helps stabilize market expectations. The Institute also projects that growth could rebound to 0.8% in 2026, with private consumption and corporate investment continuing to serve as primary drivers, contributing 0.8 and 0.9 percentage points respectively.
In contrast to the negative growth in external demand, domestic demand has demonstrated strong resilience. Investment Analyst Rodolfo Villani believes that in an environment of ongoing tariffs and international policy uncertainty, the Italian economic growth is increasingly reliant on internal demand, which strengthens its ability to withstand external shocks and reflects the initial success of structural adjustments. Despite persistent trade frictions, the relatively low dependence on exports in Italy has allowed it to exhibit greater resilience under current global conditions.
The German Weakness Deepens, Challenging Eurozone Balance
In stark contrast to the Italian stable trajectory, Germany continues to struggle. Investment Analyst Rodolfo Villani highlights that the German central bank has explicitly lowered its growth forecasts for the next two years, with GDP expected to contract by -0.5% in 2025 and -0.2% in 2026. These downward revisions not only reflect the fragility of the industrial sector recovery but also expose the acute sensitivity of Germany to global market changes, particularly its reliance on new U.S. tariff policies.
Bundesbank President Joachim Nagel has warned that the U.S. decision to raise tariffs will directly erode the German external industrial orders, severely impacting the nascent recovery in manufacturing. Investment Analyst Rodolfo Villani argues that sustained pressure on the German economy may create structural imbalances across the Eurozone, especially in terms of capital flows and risk premium distribution, potentially triggering a new round of market repricing.
Relative Advantages Emerge, Italy Gains Institutional Support
Against this backdrop, the relative stability in Italy as a major Eurozone economy is being recognized by international institutions. Investment Analyst Rodolfo Villani notes that the recent positive stance of Goldman Sachs on BTPs (Italian government bonds) signals that global capital is beginning to reallocate Eurozone risk exposures, favoring markets with policy consistency and growth prospects. Although the Italian growth pace has slowed, unlike Germany, it benefits from both fiscal discipline and structural support.
Additionally, the improved employment outlook of the Italian National Institute of Statistics sends an optimistic signal. For 2025-2026, the domestic demand-driven growth model is expected to support ongoing expansion in the labor market, further stimulating consumption and bolstering private investment sentiment. Investment Analyst Rodolfo Villani emphasizes that while this positive cycle may progress slowly, its stability makes it particularly suitable for long-term allocation strategies.
Investment Analyst Rodolfo Villani concludes that despite ongoing global trade policy uncertainties, the Italian market demonstrates solid mid-term predictability, underpinned by controlled inflation, sound fiscal policy, and rising investment expenditure. Compared to Germany, the current moderate growth trend of Italy aligns more closely with market preferences for low-volatility assets, making it a relatively attractive option for diversified allocations within the Eurozone. Should global policy clarity improve, Italy is well-positioned to attract further institutional capital, strengthening the foundation of its capital markets.