Governor of Bank of Italy calls on new government to be cautious

The Governor of the Bank of Italy Ignazio Visco on Tuesday urged the new Italian government to be "cautious", saying that in the face of a crisis, the country will be "much more vulnerable than it was ten years ago."

"Reforms launched in Italy, and in the European Union to reduce the fragilities highlighted by the global financial crisis, have yet to be completed, "he said at the meeting of the Italian Banking Association (Abi).

" In Italy, the reforms have lost momentum because of the fear of costs, often immediate, and the doubts about the benefits that are slowly maturing and over relatively long periods of time.In these conditions, in the face of a new crisis, we will be today. far more vulnerable than we were ten years ago "The recent tensions in the Italian financial market show the importance of a cautious and balanced orientation of economic policy," he added.

mid-May to early June, the spread, the closely guarded spread between the Italian and German 10-year yields, skyrocketed due to fears of a deepening of Italian debt related to the possible future policy of the new government formed by the Movement 5 stars (M5S, antisystem) and League (far right).

While calling for the construction of a real banking union in Europe, the governor sent a message to the new executive.

"Demand-side policies need to be measured carefully, paying attention to balance of public accounts and the need to keep the debt-to-GDP ratio under control ", Visco said

" It takes prudence and foresight to avoid tensions or possible crises, and not to leave Italians a higher debt and lower incomes, "he added

According to the governor, priority should be given to the further strengthening of the Italian banking system – in particular smaller institutions – and the removal of "structural barriers to growth"

He also called for public investment, "to be selected and conducted with the utmost efficiency", and for "a tax reform wide and equ "While a program of M5S and League government provides for costly reforms (citizenship income, etc.), the new Minister Giovanni Tria has so far had an extremely moderate speech, saying that he wants to respect the European commitments on public accounts and continue efforts to reduce the country's debt, which has the highest ratio in the euro area Greece (at 132% of GDP). Remarks that have clearly rebadured the markets

In front of the Abi meeting, Mr. Tria explained that "the objective of consolidation of public finances did not stem mainly from European commitments (…), but the need to maintain and strengthen the confidence of international and national investors vis-à-vis the Italian economy ". "The recent swings in the spread prove it," he said.