Visco: “Inflation is a tax, the state compensates. Public debt is good”


The Governor of the Bank of Italy, Ignatius Visco, spoke at the 28th Congress of Financial Market Operators, organized in Parma by Assiom Forex, stressing that another serious crisis (maybe) is behind us and the future can be looked at with optimism. Although the problems are obviously not lacking. “The pressures on the final prices of goods and services – he stressed – would be more prolonged than initially estimated, but should subside in 2023”. From the second half of 2021 There has also been a significant, mostly unexpected, increase in inflation in many countries. On the supply and cost side, sharp increases in the price of fossil energy, bottlenecks in production chains, increased international transport costs have mainly contributed to this”.

Despite estimates of inflation to 2% in 2023, “tensions on the energy front have not yet subsided. Although the expected reduction in inflation is likely to be confirmed in the coming months, the risks of a disengagement of expectations and the start of a rise in prices and wages, which there is no of evidence at the moment, must be carefully guarded”.

Visco also pointed out that rising inflation caused by rising energy costs “it is essentially a tax, probably largely intended to come back, the most disruptive effects of which can be offset, as far as possible, by public budgets”. He recalled the interventions launched by the government and those that are evaluated in relation to an increase that determines a reduction in the purchasing power of income in the euro zone. On average over 2021 – he explained – the loss linked to the deterioration of the terms of trade has been contained around 1%; however, it increased over the year, reaching more than 2% in the fourth quarter. However, rising costs must not turn into a protracted inflationary spiral”.

the banks, emphasizes Visco, they played a very important role and “helped to overcome the difficulties” rather than to increase them. The governor then emphasized the “non-negative situation of the banking complex” in Italy, while stressing that there are “cases of fragility, mainly in small and medium-sized banks with a traditional economic model”. For many, poor credit quality is compounded by difficulties in containing costs and meeting the challenges of technological innovation.

Good news on the front of the public debt. “The expected slowdown in net purchases of securities by the ECB during this year and their possible suspension are not such as to justify, in Italy, a significant deterioration in financing conditions on the bond market”, underlined Visco. “The weight of public debt has fallen significantly and, compared to forecasts that saw it close to 160% of GDP at the end of 2021, it will probably be around 10 percentage points lower – he continued -. The trend should continue over the next few years. A moderate rise in market rates will not have a significant impact on the cost of debt, the average life of which is just under eight years If the budgetary policy is able to guarantee a gradual rebalancing of the accounts and if the PNRR finds a rapid, complete and effective implementation, any rise in interest rates will be offset by the sustainable return of the economy to trajectories higher growth.”


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