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Visco: “Public finances under control, household debt low by international comparison”

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Visco: “Public finances under control, household debt low by international comparison”

The rate hikes implemented by the ECB are “manageable for public finances” and should not have “significant repercussions on the placement and yields of government bonds”. Indebtedness of households and businesses “remains low by international comparison”. Furthermore, as long as “fiscal policies remain marked by caution, the danger of an increase in spreads should remain contained”. The governor of the Bank of Italy Ignazio Visco, speaking at the 29th Assiom Forex congress in Milan, promotes the action of the ECB to fight inflation, after the recent increase of 50 basis points to 3%. “He can continue with due caution – says the central banker -, carefully assessing the implications for the economy and the prospects” of the price increase “of the measures already adopted”. But the situation is complex. “The growth prospects for the euro area have deteriorated” and “the high level of inflation hits families hard, especially the less well-off who spend a large part of their income on the purchase of food and energy” .

According to the number one on Via Nazionale, monetary policy alone is not enough. In Italy, says Visco, “budgetary policy can continue to mitigate the effects of energy price increases by redistributing resources, with targeted and temporary interventions, in favor of the most affected households and businesses”. But “repeated slippages in the process of consolidating public finances must instead be avoided”. These “would increase the burden of adjustment on future generations, already burdened by the burden of a very high public debt”. The governor notes how the government “prudently” plans “a progressive reduction of the deficit”. If “prudence and responsibility” are needed in the management of public finances, for Visco “determination and effectiveness in carrying out the investments and reforms” envisaged in the Pnrr are also necessary.

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In any case, the action of the ECB with the recent rate hike “will have to continue by continuing to seek the right balance between the risk of doing too little, leaving inflation high for an excessive period of time” and that “of doing too much, leading to a fall in income and employment, compromising financial stability, with no less serious repercussions on price trends”. With this in mind, Visco, in front of the audience of bankers and market operators, promotes the rate hike with which Frankfurt raised rates by 50 basis points on Thursday and “announced its intention to increase them by the same amount in March”.

In a weaker international context, in which “even the economies of Italy and the euro area are decelerating”, inflation is showing signs of a slowdown. “The yields on derivative contracts – points out Visco – indicate that the expected inflation rate within twelve months is equal to 2.3%”. In all of this, rate hikes “are largely manageable for our country’s public finances, given that the average cost of debt, thanks to the high average residual life, increases gradually”. Not only. Even “the debt of Italian businesses and households remains low by international comparison”. It is now at 112% of GDP against the euro area average of 168%. According to the Bank of Italy, the risks deriving from the financial situation of households remain limited overall”, given that their debt in the last decade appears stable “just above 40% of GDP”.

Visco also speaks of the banks, and “despite the cyclical slowdown, the main indicators of the state of health of the Italian banking system remain positive overall”. Profitability, explains Visco, “is supported by the growth of the interest margin and by value adjustments on loans that are still particularly limited”.

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