“We have a very high public debt and this must never be forgotten,” warns Maria Cannata, head of the Treasury management that manages our public debt until January 2018 for 17 years. If there is a risk – Italy goes through here, she argues. So beware of the messages given to the markets.
Are we really in danger of “derailing” as Hugo Dixon wrote on the Reuters website?
«This is a theme that recurs often, whenever there is a picture of uncertainty. A country like Italy that has 150% debt / GDP must always be clear that this is a problem. If this is neglected, or this fact is forgotten, investors immediately get worried and become more cautious, keeping ready for fear of some deterioration. It is all very connected to a question of trust and credibility ».
Is post-Draghi likely to be problematic?
“At this moment, given the very high international credibility that characterized the figure of Mario Draghi, it is clear that having a change of government in perspective with uncertainties about who will be the new prime minister and his ability to keep his commitments, like Draghi has demonstrated throughout his long career, nothing is taken for granted. It is not for anyone, even less for Italy which has such a large public debt ».
What mistakes should the new government avoid in order not to have problems with the markets?
“You must avoid taking apart everything that the predecessor did.”
A classic of all the new governments taking office …
«It is a classic, but up to a certain point: it is not such a common thing, it has become so in recent years and not only in Italy. Previously, there could usually have been different changes and modulations, but a bottom line of continuity was always ensured. In the last 5-6 years, however, we have seen a bit of all colors ».
And what did this produce?
«On the one hand, perhaps, it has made the markets less sensitive to what is happening in a single country, even to certain notes that we could define as“ colored ”and which previously had perhaps been over-emphasized. On the other hand, the perception has also increased in the markets that sudden changes in policy have become more frequent and therefore more probable. Which obviously worries more in general terms. I repeat: Italy has this burden of debt and must always be careful not to convey the message that this is not perceived as a problem ”.
In the center-right, which everyone considers a winner, Meloni is against the budget variance while Salvini has made it one of the pillars of his propaganda …
“Well, as a form of propaganda it is dangerous.”
Can an experienced and internationally recognized Minister of Economy help ensure the continuity that can reassure the markets?
“I would say yes. Moreover, if we look at the ministers of the economy that we have had in the last thirty years, they may have been perceived as more or less solid figures, but in terms of preparation, caution on public accounts and many other aspects, continuity is always been insured. With different shades, of course. The choice of a minister of the economy capable of ensuring this approach in the future will also be crucial ”.
During many years at the Mef he will have seen several moments of crisis. The most sensational?
«Certainly the crisis of 2011 with the spread shot up to 550 points. In those months the market has definitely lost confidence in Italy. After that speculations will also be triggered, but these are triggered anyway in moments of turbulence. On that occasion, however, there was almost a panic phenomenon that made the situation extremely difficult. Talking to investors at that time was really hard ».
The panic of the markets is then ungovernable.
“It is very difficult to arrest: this is why we feel worried analyzes today.”
And how do you counter it?
“We need to be able to give appropriate reassurance.”
There are a couple of Bot and BTP auctions next week. Are we risking something?
“No I do not think so. Because after 2011 everything has happened and investors have understood that every step cannot be dramatized to the extreme, because evolving situations can change and adjust. The market has become more resilient and has learned to wait and not to pursue any possible fear ».
However, the most recent signs are not reassuring.
«In a phase like this, investors are cautious: it is difficult to find large flows of purchases. But there are also comforting signs, for example the BTP Green issued at the beginning of September was a great success ».
Is rate hikes a further problem for us?
“It’s another problem, for sure. But it must also be said that for about a decade we have had negative or very low rates, and this was unnatural. Today we are back in a normal situation. For this reason, now we need to focus on growth by making effective the measures taken recently and which the market has appreciated ». –
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