Public debt, investments in technology and the health of Italian banks were the main topics covered by Luigi Federico Signorini, general manager of the Bank of Italy, in his speech today at the Milan office, on the occasion of the presentation of the Report on the economy of the Lombardy region.
Signorini offered an articulated and detailed vision of how these aspects interact and influence economic growth, underlining the need to face the challenges with determination and well-defined strategies.
Technological innovation as a growth engine
Signorini highlighted how “the investments in digital technologies have definitely grown” in recent years, contributing to a slight increase in productivity in industry and in non-financial market services. Technology is seen as a key enabler to boost productivity growth and promote long-term well-being. However, Signorini warns that “the main risk for the Italian (and European) economy it seems to me to be the failure to fully participate in the rapid progress of technology".
Technological innovation, thanks to the arrival of Artificial Intelligence, represents aopportunity but also a challenge. Signorini underlines that "there are many fears that accompany it". Despite these concerns, it is essential Don't hold back innovation. Regulation must protect fundamental rights without hindering technological progress. “If some profession disappears”, states Signorini, “it will be necessary accompany the reallocation of the workforce by encouraging the retraining of workers".
Another crucial aspect concerns the venture capital. “In Italy, to encourage technological innovation, it will be necessary, among other things, to develop the venture capital market,” declares Signorini. Investments in the sector are significantly lower than those observed in France and Germany. To remove regulatory obstacles, it is essential to also reflect on corporate and bankruptcy law.
Multi-year plan for a better public budget
At the end of 2023, the Italian public debt it was equal to 137,3% of GDP. Despite a slight improvement compared to previous years, the debt remains high both historically and in comparison to other European countries. Signorini warns that "there is, at the moment, no prospect of an immediate reduction". To address the problem of public debt, Signorini suggests a multi-year plan which combines a better quality of the public budget with a gradual improvement in the structural primary balance. “It's necessary don't give in to temptation to put it off until tomorrow,” he says, underlining the importance of clear and credible objectives.
The recent reform of the mechanisms of European economic governance introduces new constraints and objectives for public finance. According to Signorini, theapplication of the new rules it will represent an important signal for both European partners and investors. “The ways in which the new rules will be applied by the European authorities and the Member States they will be crucial to determine its effectiveness,” he notes.
The condition of Italian banks
On the condition of Italian banks, Signorini's opinion is favourable. “Recently the flow of new non-performing loans in relation to performing ones has increased slightly”, but the quality of the assets remains good. Overall funding has decreased, but banks' profitability should remain positive this year too.
Signorini warns that “we must, however, continue to keep safety measures high“. Banks must adequately manage credit risk and that of liquidity, considering global uncertainties. The Bank of Italy has introduced a macroprudential capital buffer to address these challenges.
THEnon-banking financial intermediation represents another sector to monitor. Signorini underlines the importance of refining the regulation of this sector, in particular of investment funds. “It is important, therefore, refine the regulation of this sector, and in particular of investment funds", he states, indicating that a strengthening of prudential safeguards benefits the creation of a single capital market.
