Visco: more investment in Maneuver due to growth, no doubt about ECB measures effectiveness
2019-10-31T10:42:39.847Z
"A re-composition of the public budget that allows to increase the resources dedicated to investments, both tangible and intangible, can stimulate economic activity beyond the short term". Bank of Italy Governor Ignazio Visco said this at World Savings Day. Visco has also invoked "a collective work" for growth, economic policy by removing the brakes, businesses and banks, proving ready to invest. "There is no reason to doubt" the effectiveness of the new measures announced by the European Central Bank, which confirm a monetary policy that "will remain decidedly expansive" the governor said, slowing down a further decline in rates from the current -0.5% current : "the consequences of a reduction in official rates to even more negative values must be assessed more carefully". Visco explained that "the low inflation and the current economic slowdown must be firmly opposed, also to avoid that they translate into a further progressive reduction of expectations or a re-emergence of the threat of deflation". It is in this scenario that "the Governing Council of the ECB responded in a timely, appropriate and proportionate manner to the worsening economic situation and price outlook, launching a broad set of expansive measures," the governor said. "The monetary policy stance will therefore remain decidedly expansive as long as necessary, to support aggregate demand and thereby ensure price stability". The spread has fallen to just over 130 basis points from the peak of almost 290 "thanks to the decrease in uncertainty over the orientation of national economic policies, to less tensions with European institutions and to greater monetary accommodation", Visco said, noting that "the decline also contributed to the decline in the redenomination risk premium, which fell to almost 30 basis points", ie the premium that incorporates the perceived risk of exit from the euro. Budget policy interventions "must be selected on the basis of their impact on demand" but "the actual achievement of the planned balances must also be ensured" and "giving certainty about the conditions and prospects of public finances remains essential" said Visco, also invoking "concrete initiatives" to boost the growth potential and thus bring down the debt / GDP ratio. "After a slightly positive growth in the second quarter, economic activity in Italy should have remained almost unchanged in the summer". The governor notes that "the manufacturing sector has strongly suffered from the close productive and commercial ties with Germany" where the GDP fell in the second quarter. "If continued, the contraction of the German economy cannot but extend to other countries". Italian banks sharply reduced impaired loans, whose incidence on total loans fell from 4.3 to 4% in the first half and fell to 3% at the end of 2021 but "the continuation of the current phase of weakness" of the economy could restart the flow of Npl. This is what Visco warns urging the banks to continue "in an orderly but resolute manner" especially the small ones "to strengthen the budgets". The governor of the Bank of Italy once again asks for "effective forms of integration" for smaller banks and above all for "the popular minors" who suffer from "corporate governance problems" and for which "initiatives and reinforcement projects that we have been hoping for for some time now ". Speaking of Savings Day, Visco pointed out that "many of the approximately 90 non-significant banks operate on a particularly limited scale that reflects on their ability to adapt operating models to technological developments". "The improvement in profitability is essential for small and medium-sized banks that are still affected by the effects of the profound and prolonged economic recession, particularly in Southern Italy". Visco at the Day notes how "the interest margin continues to remain under pressure, also due to the high competition in the market for better quality customer loans". The governor underlined how "the actions aimed at diversifying revenues and, again, at containing costs must continue, especially for smaller intermediaries; the reduction in the operating costs of the less significant banks was just under 1% in the first half of this year, against a drop of almost 4 recorded by significant groups ". The Eurozone remains incomplete and needs a budgetary capacity, a secure common financial activity (safe asset) and a coordination of budgetary policies that could start from "a common program of public investments aimed also at improving the main infrastructures - energy, transport, urban services "the governor said at the day of savings.
Ignazio Visco (Ansa archival photo)
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October 31, 2019 "A re-composition of the public budget that allows to increase the resources dedicated to investments, both tangible and intangible, can stimulate economic activity beyond the short term". Bank of Italy Governor Ignazio Visco said this at World Savings Day. Visco has also invoked "a collective work" for growth, economic policy by removing the brakes, businesses and banks, proving ready to invest. "There is no reason to doubt" the effectiveness of the new measures announced by the European Central Bank, which confirm a monetary policy that "will remain decidedly expansive" the governor said, slowing down a further decline in rates from the current -0.5% current : "the consequences of a reduction in official rates to even more negative values must be assessed more carefully". Visco explained that "the low inflation and the current economic slowdown must be firmly opposed, also to avoid that they translate into a further progressive reduction of expectations or a re-emergence of the threat of deflation". It is in this scenario that "the Governing Council of the ECB responded in a timely, appropriate and proportionate manner to the worsening economic situation and price outlook, launching a broad set of expansive measures," the governor said. "The monetary policy stance will therefore remain decidedly expansive as long as necessary, to support aggregate demand and thereby ensure price stability". The spread has fallen to just over 130 basis points from the peak of almost 290 "thanks to the decrease in uncertainty over the orientation of national economic policies, to less tensions with European institutions and to greater monetary accommodation", Visco said, noting that "the decline also contributed to the decline in the redenomination risk premium, which fell to almost 30 basis points", ie the premium that incorporates the perceived risk of exit from the euro. Budget policy interventions "must be selected on the basis of their impact on demand" but "the actual achievement of the planned balances must also be ensured" and "giving certainty about the conditions and prospects of public finances remains essential" said Visco, also invoking "concrete initiatives" to boost the growth potential and thus bring down the debt / GDP ratio. "After a slightly positive growth in the second quarter, economic activity in Italy should have remained almost unchanged in the summer ". The governor notes that "the manufacturing sector has strongly suffered from the close productive and commercial ties with Germany" where the GDP fell in the second quarter. "If continued, the contraction of the German economy cannot but extend to other countries". Italian banks sharply reduced impaired loans, whose incidence on total loans fell from 4.3 to 4% in the first half and fell to 3% at the end of 2021 but "the continuation of the current phase of weakness" of the economy could restart the flow of Npl. This is what Visco warns urging the banks to continue "in an orderly but resolute manner" especially the small ones "to strengthen the budgets". The governor of the Bank of Italy once again asks for "effective forms of integration" for smaller banks and above all for "the popular minors" who suffer from "corporate governance problems" and for which "initiatives and reinforcement projects that we have been hoping for for some time now ". Speaking of Savings Day, Visco pointed out that "many of the approximately 90 non-significant banks operate on a particularly limited scale that reflects on their ability to adapt operating models to technological developments". "The improvement in profitability is essential for small and medium-sized banks that are still affected by the effects of the profound and prolonged economic recession, particularly in Southern Italy". Visco at the Day notes how "the interest margin continues to remain under pressure, also due to the high competition in the market for better quality customer loans". The governor underlined how "the actions aimed at diversifying revenues and, again, at containing costs must continue, especially for smaller intermediaries; the reduction in the operating costs of the less significant banks was just under 1% in the first half of this year, against a drop of almost 4 recorded by significant groups ". The Eurozone remains incomplete and needs a budgetary capacity, a secure common financial activity (safe asset) and a coordination of budgetary policies that could start from "a common program of public investments aimed also at improving the main infrastructures - energy, transport, urban services "the governor said at the day of savings.
