The chapter explores the origins and consequences of rising public debts in Italy since the 1970s. The Banca d’Italia was now able to increase its institutional power and to become one of the most powerful central banks in Europe. At the same time, the financial sector profited from the massive expansion of the sovereign debt market in Italy. Through high saving rates, private households financed a huge part of the public debt. The chapter analyzes how internal political and economic coalitions were a decisive aspect of the new system of debt management. The successful mobilization of domestic institutional investors and private households also explain why Italy was able to prevent dramatic bank insolvencies or external debt crises during the 1970s. The chapter argues that Italy’s reorganization of the sovereign debt market was efficient in creating short-term solutions. However, in a long-term perspective, this strategy was not sustainable and created the problems that Italy is facing today.