The economic recovery scenario, which this year sees a growth higher than expected around 6% and a reduction in debt / GDP, is “a scenario that remains heavily dependent on the maintenance of substantial support from economic policies which, with respect to in the emergency phase, it can be more targeted and above all aimed at stimulating the supply potential of the economy “. Words and music by the Governor of the Bank of Italy, Ignazio Visco, in the speech on World Savings Day.
On the other hand, the financing conditions guaranteed by the ECB, which will remain favorable in the expectations, “may favor the decline” of the debt / GDP ratio but “it is not possible to count on a debt burden kept indefinitely at the current exceptionally low levels” also because “To avoid the recurrence of the risks of instability experienced in the past, once the crisis is over, it will be necessary to accelerate the return, also by reconstituting adequate primary surpluses”.
Especially in consideration of the fact that in 2020, in the euro area the ratio of public deficit to GDP jumped from 0.6% in 2019 to 7.2%. The public debt also increased sharply from 83.6% at the end of 2019 to 97.3% at the end of 2020. And according to Eurostat data, the Italian deficit (-9.6%) is the fourth in the euro area, while the public debt at 155.6% of GDP is second only to that of Greece.
European Union
Enough for Visco to suggest that the European Union endow itself with a fiscal capacity by issuing common debt. And “to quickly guarantee liquidity and depth to the market of this new instrument, one can think of a common management of part of the debts of individual countries through an amortization fund that would withdraw national instruments by issuing European securities”, including “at least the debt incurred by all member countries in the last two years to cope with the effects of the pandemic ”.
Inflation
On the recovery front, Visco cannot ignore how the Eurozone is dealing with the difficulties in the procurement of raw materials and intermediate goods, partly due to the speed of the recovery, with strong increases in energy prices, in detail of gas: “The effects of supply bottlenecks, which are beginning to be felt also in Italy, are to be assessed as temporary, but could weigh on production and prices longer than initially expected”.
cryptovalute
The governor of the Bank of Italy Ignazio Visco returns to warn about the risks for savers from cryptocurrencies “which by their nature have an unstable value and can also favor illegal transactions”. In his speech on the Day of Savings, Visco cautions on the “uncontrolled diffusion of these instruments, whose market capitalization on a global level has tripled in 2021, reaching 2,500 billion dollars”. For the governor, another theme is the so-called “stablecoins” which, due to their characteristics, could be used for payments.
Bond
In order to channel the fixed savings in bank deposits, which rose by 200 billion with the pandemic, to companies, it is necessary to expand the offer of financial instruments through the issue of more bonds and liquid instruments of our companies. This was stated by the governor of the Bank of Italy Ignazio Visco in his speech on the day of savings according to which among mutual funds “only a small part finances resident companies”. Visco acknowledges “modest progress” in the increase in the value of the bonds of Italian companies “which remains low in international comparison”.
Loans at risk
Bank loans to companies with a “significant increase in credit risk” have risen by 40% since the end of 2019 and for this reason the Bank of Italy is urging banks “to continue to carefully evaluate the prospects of the companies entrusted to them and to carry out prudent and timely provisions “. Governor Ignazio Visco affirms this in his speech at the Day of Savings according to which “the quality of bank loans has not so far been affected by the crisis, also thanks to the support measures and the recovery of economic activity”. “The scarce recourse to the capital market by companies hinders their capital strengthening and exposes them to the risk of imbalances in the financial structure,” added Visco.