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Visco: "Monetary policy will continue to support the recovery"

2020-10-11T07:54:56.804Z


Against the negative spiral triggered by the pandemic crisis, it is necessary to intervene with accommodative budget and monetary policies, to restore confidence to businesses and families (ANSA)


Against the negative spiral triggered by the pandemic crisis, it is necessary to intervene with accommodating budget and monetary policies, to restore confidence to businesses and families.

Long interview with the governor of Bankitalia Ignazio Visco at the opening of Corriere della Sera, with an analysis of the response of the Italian economy to the shock covid and future prospects.

The government found itself managing a dramatic situation, but it did not come out badly in international confrontation.

And now he must seize the opportunities of this momentous moment.

Young people need facts, not words, because saying to a young person 'do not worry', without facts to support him is wrong.


    In peacetime, Visco explains to Corriere, "we had never seen such a pronounced fall in economic activity", but in the Bank of Italy "we remain convinced that we are in a phase of gradual recovery".

Everything must be done to reduce uncertainty and to avoid the "prolonged fall in aggregate demand".


    Until we understand what the new world will be, however, "the structure of production and the nature of investments will not be defined and we could experience a complicated transition.


    This is the picture that worries me most, because today it is difficult to give answers".


    On the role of banks with respect to the most difficult positions, Visco explains that "the supervisor knows that a growth in non-performing loans is inevitable. But if we do not immediately put into the balance sheet what clearly cannot be recovered, banks will accumulate such losses. to require rapid and substantial recapitalization interventions, perhaps in difficult market conditions ".

And he adds that "we need an honest analysis: if a company cannot be put back on track, we need to think about other interventions that the government can do concerning, for example, unemployment benefits and income support".


    The debt, both public and private, in Europe "is already high and would grow further with deflation", argues the number one of the Bank of Italy.

To avoid this scenario, "monetary policy must be expansionary and remain so for a long time".


    Italy, he adds, has always honored its debt, has never given up paying it, but there are costs in this: "If the debt burden is too high, this limits the possibility of using the resources for other purposes. important ".

And he clarifies that there are three variables that matter: economic growth, interest on the public paper and the primary surplus (net of interest, ed).

"These variables are linked, but growth is the fundamental one: without it we cannot bring down the debt-to-product ratio, which is the clearest demonstration of our ability to repay. Whoever buys the debt must be sure that it will be honored. full".


    As for young people, the governor stresses that now that we will have "more investments in innovation, this will require high skills; it is the same for a more capable public administration. Young people should study, invest in themselves, in their human capital".

If "we are not able to greatly increase participation in work - in particular of young people, women, people in the South - there will be a fall in GDP".


    Finally the government.

Visco notes that he found himself managing a dramatic situation, but in the end, in the international comparison, he did not come out badly.

"It has collected a very difficult legacy - says the governor -, because we have all been responsible in the past in not being able, as a country, to take the best of the opportunities of a more open world.


    We remained in our small world, condemning ourselves to a prolonged stagnation. This is why the opportunity this government has is epochal and must be seized ".

Source: ansa

All life articles on 2020-10-11

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