Government, Visco also freezes the left and promotes Meloni in economic policies

Giorgia Meloni should listen to investors’ fears about Italy’s public debt, reducing the deficit and carrying out the reforms the country needs. The opinion comes from the governor of the Bank of Italy, Ignazio Visco, in an interview with the Financial Times. Visco, who will step down as leader of Palazzo Koch at the end of this month after 12 years, explains to the British newspaper that the recent rise in Rome’s financing costs shows that investors are “insuring themselves” against a spiral of weak growth prospects for the long-term country with high debt. “Clearly we need to understand why markets are worried,” said Visco. «I don’t believe there is speculation against the country. I think it’s fundamentally a concern about the potential growth rate of the economy over the long term.”

The yield on Italy’s benchmark 10-year bond last week rose close to 5% for the first time since Europe’s sovereign debt crisis raged 11 years ago. The rate hike occurred against a backdrop of growing tensions in global bond markets, which have seen heavy selling due to fears that central banks will keep interest rates high for longer than expected to control inflation. Giorgia Meloni’s government, continued the governor, striking a blow to the left, “has done better than many expected” in terms of budgetary policies, “which is why we must respond to the markets with two things: firstly, a vision long-term – long-term growth plan and, secondly, short and medium-term measures regarding budgetary imbalances.”

“The increase in the debt/GDP ratio is mainly due to the disappointing performance of GDP”, continues Visco in the conversation with the FT, warning that “the services sector is also slowing down” and that a recession in the euro zone is possible in the second half of this year. For Visco “Italy can grow more and we should not ignore the low levels of private debt and the country’s positive net external position”. What worries the governor, however, is the spread between the 10-year BTP and the Bunds, close to 200 basis points, a “worrying level because it is much higher than that of Spain or Portugal”. Finally, the governor spoke about the super bonus that triggered a frenzy of house renovations in Italy, which now weighs heavily on public finances. For Visco, the final budget will probably exceed 100 billion euros, around 5% of GDP. It was, unfortunately, “a good lesson, an excellent lesson” about the importance of “targeting and personalization” of government programs, adding that initiatives to help poor families struggling with high energy costs have been implemented much better.

Source: IL Tempo

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