In my recent post, “The Next War Will Be Like No Other,” I wrote about the growing tension between generations. As populations age, younger people are being asked to support more older people, while also inheriting the debts accumulated by their predecessors.
That tension becomes especially difficult when economic growth is weak. Governments face demands to protect pensions, improve public services and preserve living standards. Borrowing offers a politically convenient way to postpone difficult choices. But postponing a problem will likely make it more difficult to solve.
I moved to Italy in February 2025, and it is now my home. In this post I want to explain the economic challenge Italy faces as I see it, suggest some ways forward and describe the part I hope to play.
Government debt must be measured against the economy’s ability to support it
Debt per person tells us something about the scale of public obligations. Adjusting it for inflation helps distinguish a real increase from the declining purchasing power of money. But debt relative to GDP adds an essential perspective: how large are those obligations compared with the income the economy generates?
The first graph shows how inflation-adjusted debt per person has changed. The second shows the debt burden relative to annual economic output.
Figure 1. Real government debt per person, percentage change since 2005. Cumulative change 2005–2025, with the compound average annual rate in parentheses: Italy +33.7% (1.5%), France +93.0% (3.3%), USA +145.2% (4.6%), Israel +14.5% (0.7%).
Figure 2. General government gross debt as a percentage of GDP.
Starting and ending values
| Measure · 2005 → 2025 | Italy | France | USA | Israel |
| Real GDP per person Index, 2005 = 100 | 100 → 103.5 | 100 → 114.0 | 100 → 129.7 | 100 → 144.6 |
| Real debt per person Index, 2005 = 100 | 100 → 133.7 | 100 → 193.0 | 100 → 245.2 | 100 → 114.5 |
| Real debt per person Average annual change | 1.5% | 3.3% | 4.6% | 0.7% |
| Government debt / GDP | 106.2% → 137.1% | 68.2% → 115.5% | 65.8% → 124.4% | 85.7% → 67.9% |
Source: IMF World Economic Outlook, October 2026, and calculations used in the accompanying graphs. Rounded estimates, subject to revision. Real series are indexed to 2005 = 100, not dollar amounts; debt is adjusted using the GDP deflator. Average annual changes are compound rates. GDP per person is an output measure, not household disposable income.
The table tells an important story. Italy’s real debt per person rose by about a third over twenty years—less than in France or the United States. Italy’s problem is not that it borrowed more than they did. It is that its economy barely grew: real GDP per person rose just 3.5% in twenty years. The United States borrowed far more, but stronger growth cushioned part of the effect. Israel is the striking exception. Its debt per person barely increased, its GDP per person rose by 45%, and its debt burden fell. Growth, not austerity, is what brought the burden down.
The principle is straightforward: government debt cannot persistently grow faster than the economy without the debt burden rising. The ratio comes out the same whether we compare nominal debt with nominal GDP or adjust both for inflation, as long as the same price index is used for both. That is why the real indices in the table produce exactly the same debt-to-GDP ratios.
That does not mean governments should never borrow. Borrowing can help during emergencies and finance investments that improve future productive capacity. Nor must every country eliminate its debt. Borrowing to finance productive investment can strengthen the future; borrowing indefinitely to sustain commitments that outgrow the economy cannot. Interest payments compete with education, infrastructure, research and other spending that might improve that future. As younger people realize that their future is being mortgaged, they may opt to leave the country, weakening it even more.
In Italy, this is already happening. ISTAT, the national statistics institute, estimates that over the past decade Italy has suffered a net loss of about 97,000 young university graduates—people whose education the country paid for and whose talent now strengthens other economies.
Population aging intensifies the problem. Pension and care needs rise while the workforce supporting them may shrink. This combination can produce prolonged stagnation, painful tax increases, cuts in services or a fiscal crisis. Collapse is not inevitable, but neither is a comfortable adjustment.
The politics of postponement
The protests over pensions and public spending in Europe reveal how difficult these choices have become. People reasonably fear losing security or being asked to work longer without suitable jobs. Their concerns deserve serious attention.
Populism makes that harder when politicians promise benefits today while disguising the future cost. Borrowing can become an electoral tool: the benefits arrive before the next election and help keep politicians in office, while much of the bill arrives afterward.
This temptation belongs to no single political camp. It appears whenever leaders promise that difficult trade-offs can somehow be avoided.
Nor do I believe that “tax the rich” is a sufficient economic strategy. Wealthy people should contribute, and effective enforcement matters. But capital, entrepreneurs and highly skilled professionals have choices about where to invest and live. Tax policy must account for those choices.
Longer lives require a change in retirement policy
A government needs a productive, expanding tax base. It cannot substitute ever-higher claims on that base for the work of helping it grow.
As people live longer, retirement policy needs to adjust. If longer lives mean longer retirements without longer working lives, the cost falls increasingly on younger workers through contributions, taxes or government borrowing.
The relevant measure is life expectancy among people approaching retirement. Linking pension ages to that measure would make adjustment more predictable and help distribute the benefits and costs of longevity across generations.
The goal should be to enable longer, productive working lives. Governments and employers must support flexible hours, gradual retirement, retraining and opportunities for older workers. There must also be protection for people whose health or physically demanding occupations make continuing unrealistic.
Italy already has a relatively high standard pension age. The greater challenge is the gap between the legal retirement age and when people actually stop working. Raising the threshold has limited effect if workers instead shift to unemployment or other benefits.
Retirement reform can help, but it needs to be part of a broader economic strategy.
Italy needs to grow
I am uncomfortable with presenting “austerity” as a complete prescription for Italy. Spending discipline matters, but indiscriminate cuts can weaken the education, research and infrastructure on which future growth depends.
Italy needs to examine what government spends, what that spending achieves and what government makes unnecessarily difficult.
Bureaucracy can hang like a wet blanket over a business. A large company can employ specialists to navigate complicated requirements. A small company may find that compliance consumes the time and money it needs to survive.
This is especially damaging for innovative companies, which are already dealing with technical uncertainty, limited capital and the challenge of finding customers.
Simpler procedures, predictable decisions and faster administration are economic policies. Their value should be measured in businesses created, investment attracted and time returned to productive work.
Israel shows that an economy can change
Israel was not always the “Startup Nation.” The Israel I knew decades ago had a much stronger socialist orientation and a far larger role for the state in economic life. Its later transformation was a process involving economic reforms, research institutions, technical capabilities, immigration, entrepreneurship and access to international markets.
Government helped connect those ingredients. The Yozma initiative helped develop a venture-capital industry capable of attracting international investors. Technology incubators helped entrepreneurs move from ideas toward businesses. These policies addressed a practical problem: research and technical talent do not automatically become successful companies.
Immigration also mattered. Engineers and scientists arriving from the former Soviet Union expanded Israel’s technical capabilities. Giving that talent opportunities to build companies helped turn immigration into an economic advantage.
Innovation is an important part of Israel’s economic story, although it is not the only explanation for its performance. Italy cannot copy another country’s history. It can learn from the deliberate effort to connect talent, research, capital and customers. A key to Israel’s remarkable success was government policies. The Israeli government was proactive in creating the environment that led to the Startup Nation.
Three priorities for Italy
I would concentrate on three connected priorities.
First, make it more attractive to finance and join innovative companies.
Italy should offer strong, straightforward and predictable tax incentives for early-stage investors and employees. Employee ownership is particularly important. Young companies often cannot compete with established employers on salary. Equity allows employees to share in the value they help create. Tax rules should recognize that an ownership stake in a young company may be illiquid and highly uncertain.
Investor incentives should encourage genuine risk-taking and new investment. They should be simple enough to use and evaluated against results.
Second, actively attract the people the innovation economy needs.
Italy should welcome entrepreneurs, engineers, researchers and other professionals who wish to move to Italy and help build new businesses. It should also make it easier for international graduates to stay and for Italians abroad to return.
Immigration policy should connect to practical needs: permission to work, timely decisions, recognition of qualifications and workable arrangements for families. The contributions of Indian immigrants to American technology and former Soviet immigrants to Israel illustrate the opportunity. Talent is distributed across the world. Countries benefit when they give that talent a reason to come and a way to contribute.
Italy’s quality of life is an advantage. For people reconsidering their future in the United States, Israel or elsewhere, Italy could become an attractive professional destination as well as a beautiful place to live. But that requires a credible opportunity to build a career or company.
Third, improve the path from research to business.
Italy has excellent research institutions, including IIT. The challenge is to turn more of that research into products, customers and growing companies. The OECD has explicitly noted the gap between Italy’s excellence in basic research and its weaker commercial innovation.
This requires experienced entrepreneurs working alongside researchers, practical arrangements for intellectual property, access to early capital and incubators that provide more than office space.
Education also belongs here. I would like to see more approaches that connect learning with technology, entrepreneurship and practical problem-solving, with H-FARM as an example worth examining. Students need opportunities to experiment, collaborate and turn ideas into something useful.
None of this is free. Tax incentives have costs, and effective institutions require people and resources. But progress does not always require an enormous new spending program. It often requires imagination, simpler rules and better use of capabilities that already exist.
AI must be central to the response
For an aging country, one of the most important questions is how to produce more value with a constrained workforce. I believe AI will be the most powerful tool for doing so in the coming decades, and a driving force of innovation.
Italy should stop debating whether AI will change work. It will. The practical question is how Italian companies, researchers, educators and public institutions can use it well to raise productivity and create businesses.
This matters especially in Italy, where most businesses are small. A small company cannot afford a team of specialists, but AI can help it with software, customer service, translation, analysis and administration. For researchers, it can accelerate parts of discovery and development. For government, it offers a way to cut delays and repetitive paperwork—the same bureaucracy that weighs on businesses today.
The opportunity extends well beyond creating AI companies. It includes helping existing Italian businesses become more capable and competitive. AI will also change jobs, and some people will need help moving into new work. That makes education and adaptation more urgent. Resistance alone will not protect living standards if competitors become more productive.
A contribution to my new home
Before coming to Italy, I lived in the Netherlands and, before that, spent eight years in Israel during my second time living there. While I understand America and Israel very well, I am still becoming familiar with this beautiful country and increasingly aware of the economic challenges it faces. I also recognize the extraordinary capabilities it could bring to solving them.
My professional life has largely involved helping turn new technologies into businesses. But I am still a scientist and inventor at heart.
I decided to devote some of that experience to my new community. I became a Fellow at the Italian Institute of Technology, invested in Elevo, a venture studio, and began advising H-FARM and CMCC. At 81, I still want to be relevant and experience the satisfaction of making a significant contribution. I have been fortunate to enjoy that throughout much of my life. I would like to continue here.
Eventually, I decided to focus on creating an innovation ecosystem in Lecce, where I live. I hope to help startups develop here and persuade American and Israeli companies to locate their European headquarters in Lecce. So far, I am making good progress. I do know that innovation will be key to making Italy economically vibrant once more.
I do not believe Italy lacks talent, creativity or ambition. I see those qualities around me. I want to help create conditions in which more of them can become successful enterprises. I feel like I entered an auditorium and found an amazing orchestra but one without a conductor. Italy needs company builders. I have met a few, like Davide Rota who helped create Generative Bionics along with Elevo and Riccardo Donadon, the visionary founder and leader of H-Farm. But we need many more. I strongly believe this will take attracting people from outside of Italy and in particular America. Most will be surprised to learn that about 50% of the CEOs of the top technology companies in the USA are immigrants (most from India).
What draws me to Lecce
What draws me to Lecce is the possibility of connecting research, entrepreneurs, investment and international experience in a community that blends the ages. A place where the past can meet the future surrounded by beauty and warmth of the land and the people.
My wife and I are renovating a palazzo built in 1731 in Lecce’s historic center. It is a major undertaking and symbolizes my work here: integrating modern technology into a home built from carefully carved local limestone.
I cannot promise that my efforts to accelerate growth in Italy will succeed. Building companies has taught me to respect uncertainty. It has also taught me that worthwhile change can only begin when people decide to try.
Building, not borrowing
Longer working lives can help sustain the workforce. Immigration can bring additional talent. Innovation can increase what each worker produces. Better government policy can make all three more effective.
We cannot ask younger generations to carry debts they did not create while denying them the economic dynamism to pay them. Borrowing buys time, but time alone solves nothing. If we want to honor our past without mortgaging our children’s future, our only real choice is to build things that matter and create the growth that debt never could.
