Budget Balance (% GDP): - 5.2

Population: 60.4m

National interest has helped unite a fractious coalition government, but the prime
minister, Giuseppe Conte, lacks the backing to advance basic reforms to the economy,
such as cutting red tape and reducing corruption. Asset purchases by the European
Central Bank will underwrite Italy’s shaky sovereign debt, as long as the country
returns to strict fiscal discipline as the pandemic subsides. The economy will endure
one of Europe’s most severe virus-induced recessions and recovery will be slow. The
budget gap will narrow from a 2020 blow-out and public debt will decline modestly as a
percentage of GDP.

TO WATCH: Sense of proportion. The governing coalition will push for an all-
proportional electoral system that would make it harder for the resurgent right-wing
Lega and far-right Fratelli d’Italia to win power.

Latvia

GDP growth: 4.9%

GDP per head: $17,680 (PPP: $22,850)

Inflation: 0.9%

Budget Balance (% GDP): - 2.4

Population: 1.9m

The centre-right government took office just in time to confront the start of the covid- 19
outbreak, and duly declared a state of emergency. As the economy rallies, fault lines in
the coalition will re-emerge. New Unity, the party of the prime minister, Krisjanis Karins,
is the smallest in the coalition, while three allied parties are new to government. Two
more, the populist Who Owns the State? party and the Eurosceptic National Alliance,
will push policy away from the country’s long-standing centre-right consensus. Reliance