On May 31, the Governor of the Bank of Italy, Ignazio Visco, will read his latest Final Remarks in front of the bank's meeting. After 12 years in November Visco he will leave his post started on 1 November 2011, just after the fall of the Berlusconi government and the birth of the Monti government which, as it will be recalled, was supported by 90% of the Parliament, with the aim of avoiding the default of the country hit by a wave of distrust by domestic and foreign investors, so much so that the spread of our public bonds with respect to German ones had exceeded 550 points.
They were 12 years really troubled that Visco was able to face with style, coolness, technical vision, and political patience. A person who knows him well called him "a good economist with a straight back". A phrase that paints it second well Stephen Micossi former general manager of Assonime who worked with Visco at the Bank of Italy in the 70s. “He is a measured man who doesn't really like media exposure. He held the office of governor - says Micossi - as a service to the country and not as a means to acquire power. We can well say that he follows in the footsteps of the great Governors of the Bank of Italy from Menichella to Carli to Baffi, from Ciampi to Draghi who made the bank a central institution for the balance of the country. Visco has kept the bank's reputation high even going through profound changes and critical periods which had rarely been seen in the past".
In fact, with the birth of the single currency some of the fundamental powers of the Bank of Italy in matters of monetary policy passed to Frankfurt so that the national banks concentrated above all on the control of the banking system as well as obviously providing important contributions to the formulation of the monetary policy of the EU.
“In this latter respect – Micossi affirms – Visco's personal image as an economist of international standing has greatly contributed to making our bank particularly appreciated also in the ECB council in Frankfurt. And Visco hasn't given up on practicing his profession as an economist in recent years, publishing essays on the role of education as a lever for growth, and most recently an essay on inflation and the damage it can cause. But already many years ago he made his way into the world of economists with a thesis on inflation expectations which is now topical again ”.
In the management of banking crises which manifested themselves in Italy in 2013 and 2014 just as a uniform mechanism was being developed in Europe to address the failures, there were some uncertainties.
“The race for the resolution of the four banks (among which the one in Arezzo stood out, also for political reasons), was done to avoid the complete application of the European bail-in directive which also put at risk customer deposits over a certain amount".
However, it was later understood that that directive, correct in principle because it sought to prevent the honor of bank bailouts from falling on public finances and therefore on all citizens, in practice risked leading to very heavy systemic burdens. An attempt was then made to return to the old road, certainly by making the shareholders and managers of the bank in difficulty pay, but then by involving the interbank guarantee fund on deposits, the bank was saved.
The Bank of Italy used the interbank fund for an operation and was contested by the European Commission. The matter ended up in front of the Court of Justice of the European Union (CJEU) who recognized the good reasons of our bank considering the interbank fund not a public institution.
“Today in the EU as in the USA there are no homogeneous rules for the resolution of banking crises. Overall back to the practice of bailouts. But the most important legacy of these years of crisis is the progressive change of role of the ECB which, starting with the famous letters sent in 2011 to Italy, Ireland and Spain (in addition to Greece, which however is an even more complex case) has pushed the central bank to take care of the economic policy lines of the individual states, which goes beyond its statute and which can expose the monetary authorities to criticism of the policy”.
But also in the context of monetary policy there are changes in relevant behaviors. In recent months, for example, Visco has given ample communication of his position regarding the increase in interest rates decided by the ECB to counter inflation. Visco has repeatedly signaled the need to navigate with prudence between the two rocks of inflation and recession, avoiding both as both are full of risks for economies but also for the political stability of democracies also attacked for military purposes from autocracies.
Despite the difficult period from the point of view of the economy and contrasts often under the radar with the policy (sometimes emerged as when it was decided to set up a parliamentary commission of inquiry into banking crises), Visco has kept the reputation of our central bank high. And in a period in which the credibility of all our institutions is in free fall, having a safe and reliable reference is no small thing.
