Italy’s 10-year BTP (Italian government bond) yield climbed above 4.70% to a fresh three-year high as an intensifying energy shock and stronger-than-expected inflation across major euro-area economies increased expectations for additional European Central Bank rate hikes. Markets are pricing in a third hike by year-end and at least three more in 2027. The BTP-Bund spread (the yield gap between Italian and German government bonds) reached its highest level since May 2025, reflecting renewed concerns about debt affordability. Prime Minister Meloni plans to seek greater fiscal flexibility from the EU as energy costs pressure inflation and public spending. Italy’s 2025 deficit was confirmed at 3.1% of GDP, above the EU’s 3% EDP ceiling, while voluntary fuel-price cuts by energy companies operating in Italy could offer some relief before next year’s general election.