Visco, inflation hits families, growth slows down

"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" .

This was stated by the governor of the Bank of Italy Ignazio Visco in his speech at Assiom Forex according to which the action of the ECB "will have to continue by continuing to seek the right balance between the risk of doing too little, leaving inflation high" and that "of doing too much leading to a fall in income".

And he observes how in the rate decision the day before yesterday "the ECB" balanced "these two risks" by raising rates, announcing a further increase of 50 points and "

However, Visco reiterates that "In Italy, budget 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".

However, he explains, "repeated slippages in the process of consolidating public finances must be avoided, which would increase the burden of adjustment on future generations, already burdened by the weight of a very high public debt". 

"At the moment it does not appear necessary to reintroduce generalized support measures similar to those designed to deal with the pandemic crisis".

Also because "until now the deterioration rates of the loans that have benefited from the State guarantee have remained low - notes Visco - despite the pre-amortization period for most of them, in which the debtors were required to pay only the interest portion, ended for several months already".

The governor of the Bank of Italy calls for "responsible decisions" from the social partners on labor costs to avoid a further element of inflation.

And he explains how "price stability does not depend solely on the action of monetary policy, business strategies, labor cost agreements and budget policy also contribute to it. In particular, Visco asks" that the dynamics of prices and wages remain consistent with the maintenance of monetary stability.

In real terms, the growth of wages finds its limit in the evolution of productivity.

In our country, in particular, where both productivity and wages in real terms have stagnated for too long, they will play a fundamental role in creating more favorable conditions for

However, the burden of dealing with the multiple aspects of this crisis cannot fall, as has often happened in the past, on monetary policy alone", says the governor of the Bank of Italy I who recalls how "forty years ago, in the final considerations on 1981 , Governor Ciampi recalled that "monetary stability is a common responsibility, an asset never definitively acquired".

"It was true then in our country, it is true today in the euro area: in a phase of great uncertainty, the choices of all the actors, European authorities, national governments and social partners, must be consistent with each other, taking into account the contribution that the action of each one supplies to the final result" concludes Visco.

"Despite the cyclical slowdown, the main indicators of the state of health of the Italian banking system remain positive overall, explains the Governor of the Bank of Italy. "In the presence of a more rapid rise in lending rates, the increase in market yields favors banks with traditional operations, which in recent years had seen their profitability compressed by low interest margins", he underlines. "Credit quality remains good: last September - notes Visco - the incidence of impaired loans net of value adjustments was equal to 1.5 per cent". As for the "significant banks, it is substantially in line, at 1.2 per cent, with the average of the countries joining the Banking Union.

Stay low, around the

one percent of loans, the flow of new non-performing loans.

Liquidity margins - adds the Governor - were slightly reduced following the first repayments of the targeted longer-term refinancing operations (TLTRO) but remain well above the regulatory minimums". , in one of the passages of his speech, recalls that "last summer we conducted an ad hoc survey on the refinancing plans of the banks, also in the light of the forthcoming TLTRO maturities.

It emerged that the Italian banks intend to repay these loans by resorting in part to the excess reserves held with the Eurosystem and the sale of liquid assets;

just over half would be replaced with alternative sources of collection,

The rate hike and the reduction in the reinvestments of ECB securities will not have significant repercussions for the Italian public debt and the auctions of government bonds, says Visco according to whom "the official rate hikes are largely manageable for the public finances of our country" thanks to the average life of the debt and the prudent policies of the government.

Furthermore, the Qt "should not have significant repercussions on the placement and yields of government bonds".

"Looking forward - he underlines - a significant increase in loan adjustments cannot be ruled out".

"According to analyzes consistent with the basic macroeconomic scenario elaborated by the Bank of Italy, they - explains Visco - could rise, in relation to total loans, from less than half a percentage point to almost one point this year and in 2024, still half compared to the peak reached in the two-year period 2013-14 following the sovereign debt crisis, a level - notes the Governor - even higher than what would occur in an adverse scenario".