Here are the salient points of the speech by the governor of the Bank of Italy Ignazio Visco at the Trento Festival of Economics.
Sustainability
Sustainability is now a priority for all central banks. Climate risks can affect the solidity of banks by influencing one of the transmission channels of monetary policy and financial stability itself.
Here central banks can play an important role: they can inform and sensitize intermediaries and investors, undertake "education on sustainable finance" initiatives, evaluate that banks adopt climate risk management standards, protect financial stability and invest in sustainability using criteria ESG.
Next Generation EU – Productivity
The resources of the Next Generation EU program can help transform the economic and social context, accelerating the digital and environmental transitions. For Italy it is also an opportunity not to be wasted to finance the design and implementation of reforms aimed at unhinging the difficulties of our economy, which are manifested in the stagnation of productivity which has lasted for three decades.
Private investments aimed at increasing productivity can be favored by the allocation of public resources in highly innovative sectors and for the construction of new generation infrastructures, such as the completion of ultra-fast broadband, as well as in the quality of human capital. Italy's delays in the rate of connection to the network and in scarce digital skills also weigh. We need to invest in innovation, education and research and development. For an advanced country like ours, it is difficult to make progress while remaining at the bottom of research spending.
ECB position on the strong euro
No cacophony on the Board, no divisions within the ECB. President Lagarde stressed that a strong euro puts negative pressure on prices and needs to be monitored. The Governing Council, the Chief Economist Philip Lane and Fabio Panetta took the same line a few days ago.
On the euro, my position coincides with that of the Governing Council. The recent strengthening of the single currency worries us, because it generates further downward pressure on prices at a time when inflation is already low. The implications for monetary policy are clear: if negative price pressures jeopardize the objective of price stability we should intervene, while if the opposite effects emerge, the measures already taken may be sufficient. I was struck by the media reaction after our meeting: the ECB's objective is very clear, to accommodate the monetary economy as much as possible to an extraordinary situation.
Month
The Mes was created as an emergency tool for public finance or financial system crises in individual countries. In such circumstances, it provides for stringent conditionalities.
On the other hand, the special credit line activated following the pandemic, although managed by the same body, has completely different purposes and structures: it is a specific program for health care costs and there are no conditionalities as in traditional programmes. In this case there is no Troika. The stigma on the ESM is linked to a misuse of funds and bad communication.
