ATHENS/ROME: Italy is set to become the euro zone's most indebted country this year, overtaking Greece as Athens continues to bring down its debt burden after years of fiscal reforms.

Greece's public debt is expected to fall to about 137 percent of gross domestic product (GDP) in 2026, down from 145.9 percent in 2025, according to two senior officials familiar with the country's fiscal outlook.

By comparison, Italy's debt is projected to rise to 138.6 percent of GDP in 2026, up from 137.1 percent in 2025, based on the Treasury's multi-year budget plan released this week.

Officials said that, as a result, Greece will no longer hold the position of the euro zone's most indebted country, a distinction it has carried for nearly two decades.

The revised Greek debt projections are expected to be included in the country's fiscal plan to be submitted to the European Commission later this month.

Italy's debt is forecast to remain broadly stable after peaking, easing slightly to 138.5 percent in 2027, 137.9 percent in 2028, and 136.3 percent in 2029, according to the same budget plan.

Greece has made significant progress in reducing its debt since the height of its financial crisis. Its debt-to-GDP ratio has dropped by more than 60 percentage points from a peak of 209.4 percent in 2020 to 145.9 percent last year.

Italy, in contrast, has reduced its debt by about 17 percentage points over the same period.

Athens' improvement comes after a decade-long economic crisis and three international bailouts totaling around 280 billion euros (US$327.10 billion). The government also plans to repay about 7 billion euros from its first bailout ahead of schedule later this year.

Italy's debt trajectory, meanwhile, has been weighed down by slower economic growth and the legacy of past fiscal policies.

Prime Minister Giorgia Meloni has said Italy's debt would have declined sooner without the impact of costly state-backed building incentives introduced by previous governments led by Giuseppe Conte and Mario Draghi.

After a strong rebound from the COVID-19 pandemic, Italy's economy has returned to modest growth levels. The country recorded sub-1 percent growth for three consecutive years from 2023 to 2025, despite receiving substantial funding from the European Union's recovery programs.

The Treasury expects this trend of sluggish growth to continue through 2029.

In contrast, Greece's economy has outperformed much of the euro zone in recent years. It has grown by more than two percent annually over the past three years, supported by investment, domestic demand, and a strong tourism sector.