(Bloomberg) -- Group of Seven finance chiefs meeting in Italy are failing to address a key issue: their own debt.

Despite a trajectory of rising borrowings and the International Monetary Fund’s declaration last month that “now is the time” to restore sustainable budget policies, that subject doesn’t appear on the formal agenda for G-7 central bankers and finance ministers set to gather in the lakeside town of Stresa.

The topic’s sensitivity isn’t surprising given looming electoral tests in the US, UK and European Union — and a precarious fiscal situation in Italy, the host nation. Even so, with high borrowing costs hurting and debt increasing, the lack of a collective resolve risks storing up trouble.

“Debt is definitely the elephant in the room at this G-7,” said Koen De Leus, chief economist at BNP Paribas Fortis in Brussels and co-author of a new book focusing on public finances, The New World Economy in 5 Trends. “But it’s hard to address this issue now, pre-elections, because there are no easy solutions.” 

The meeting that begins with dinner on Thursday and formally kicks off on Friday will focus most on the use of revenue generated from frozen Russian assets to aid Ukraine, international taxation and the implications of artificial intelligence, among topics announced by its chair, Italian Finance Minister Giancarlo Giorgetti.

The gathering on Lake Maggiore — the scene of an abortive pre-World War II peace conference — is typical of Italy’s G-7 tradition of spectacular locations. Other places used this year include the island of Capri for foreign ministers last month, and a luxury resort on the heel of southern Italy for leaders in June.

But no amount of Instagram-worthy backdrops can obscure the country’s challenges. While investors have granted premier Giorgia Meloni breathing space by narrowing the spread of the country’s bonds over Germany’s to the lowest in two years, the outlook is souring amid the costly legacy of a pandemic-era home-renovation tax break known as “superbonus”.

Scope Ratings last week predicted that Italy will have Europe’s biggest pile of borrowings in just three years, and on Monday, the IMF issued an annual assessment calling for “faster-than-planned” action. 

That message chimes with the fund’s recommendation for the world as a whole in April, identifying a window of opportunity for budgetary repair amid prospects for a soft landing for economies and more benign inflation.

Angst about soaring debt levels is being felt across markets, where historically-large deficits in some G-7 countries have kept alive the risk of so-called bond vigilantes —a term for fixed-income investors who demand higher yields to compensate for outsized government borrowing. 

They can exert influence on fiscal policy by forcing authorities to rein in spending, and were particularly disruptive during Europe’s sovereign debt crisis. Markets are currently nowhere near those levels of stress, but worries persist.

“If you have a lot of debt, you’re going to run into problems,” said Rob Burrows, a portfolio manager at M&G Investments. “It’s one of those issues that keeps me up at night, with me thinking, how will we get out of this?” 

The IMF’s forecast last month shows the G-7’s debts rising again this year after a post-pandemic trough, and doing so through 2029. The overall deficit will narrow only slightly to 4.6% in that time.

The fund singled out the US, predicting that if current loose policies stay in place, its debt will nearly double within three decades, and will already be just shy of 134% of output within five years. 

The UK and France face rising borrowings too, and both countries received advice from the IMF this week to do something about that. 

“Substantial additional efforts, compared to staff’s current policy baseline, will be needed over the medium-term, starting in 2024, to strengthen public finance,” the fund said about France on Thursday.

Japan’s pile of borrowings meanwhile is seen stabilizing at the eye-watering level of more than 250% of GDP. Within the G-7, only Germany and Canada will cut down debt.

While each country’s situation differs, common themes explaining the mounting load include rising liabilities linked to aging populations and climate change, increasing defense costs to deter Russian aggression, and limited tolerance among voters for fiscal restraint.  

Elections taking place this year in the US and the UK too — just announced for July 4 — as well as the European Parliament ballot in June that is coloring discourse in the region, underscore the difficulty of doing much to fix public finances for now. 

Reticence to discuss fiscal challenges isn’t restricted to the G-7. Its larger equivalent, the Group of 20, avoided the matter with intent when meeting in February, after objections by China for a mention in their meeting statement.

Based on previous communiques, G-7 ministers may at least pay lip service to the need for “medium-term sustainability” of public finances, but that may be as far as they go. For Veronica De Romanis, a professor of political economy at Rome’s LUISS university, that’s a worry. 

“Clearly politicians are procrastinating,” she said. “Without a shift to fiscal restraint, sooner or later we’ll face a reality check.”

--With assistance from Kamil Kowalcze, Tom Rees, Alice Gledhill, Viktoria Dendrinou, Jorge Valero, William Horobin and Toru Fujioka.

(Updates with IMF report on France starting in 15th paragraph)

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