The announcement of the OMT plan by the ECB "was successful" and "even without effective interventions on the markets, it contributed significantly to the drastic reduction of the portion of the risk premium on sovereign bonds connected with fears about the stability of the euro .”
This was stated by the Governor of the Bank of Italy, Ignazio Visco, in a Lectio Magistralis at the Collegio Borromeo in Pavia, recalling that “the spreads have dropped to values closer to those consistent with the fundamentals, the fragmentation of the markets has eased. ”
In Italy, the yield gap between ten-year BTPs and the corresponding German securities has returned below 200 basis points.
According to Visco, estimates by the Bank of Italy “indicate that the improvement mainly reflects the reduction in the risk of disintegration of the euro area. Renewed signs of interest are emerging for the Italian markets - adds the governor - including that of government bonds, which are reflected in a drop in the debt position of the Bank of Italy in the Target2 system: at the end of February this had dropped to 190 billion euro, almost 100 less than the peak reached in August 2012.”
To reduce public debt, Visco added that, even if the rule on public debt agreed upon at European level "provides for some margins of flexibility, it is still necessary to focus on real growth of the economy, therefore on the recovery of investments - at the same time a factor of supply and fundamental component of demand". The exit from the crisis in the euro area, he explained, "cannot derive from isolated actions of individual economic policy authorities."
For Italy "the real budget constraint is given by the need to guarantee the sustainability of the public debt and to maintain full access to the financial market", concluded Visco.
