We need to go ahead with the reforms to encourage the recovery of the economy. This is the warning launched by the governor of the Bank of Italy, Ignazio Visco, who spoke this morning in Rome at the 92nd World Savings Day organized by ACRI.
“For the return of the economy to a stable growth path – said the central banker – a more convinced recovery of accumulation activity is crucial. The interventions envisaged by the Industry 4.0 plan will be able to provide a new impetus to public action in support of business innovation and investment. This action is part of the broader reform strategy that has taken shape over the years. Important interventions have been implemented which are giving the first results. We can only continue decisively on this path to improve the environment in which businesses operate, support the creation of new job opportunities, reduce the imbalances that weigh on our economy and our society".
VISCO: WEAK POINT INVESTMENTS, BUT BEWARE OF DEBT
At the moment, in fact, “the economic recovery hasn't stopped but remains sluggish – continued the Governor -. Investments remain, also and above all in Italy, the main point of weakness”, even if “after the setback in the second quarter, activity should have returned to growing slightly in the third. The recovery is positively influencing the conditions of financial stability: the increase in employment supports the disposable income of families; the financial vulnerability indices of companies are improving”.
The problem is that in Italy “the margins for public interventions to support economic activity are compressed by the very high debt. The production system – underlined Visco – suffers from the delay with which it has responded to the increased competition on international markets and to technological innovations”.
PADOAN: WEAK RECOVERY BUT THERE IS, MANEUVER AIMS FOR GROWTH
Also according to the Minister of the Treasury, Pier Carlo Padoan, “despite the efforts in Europe, the prospects for economic growth remain weak and exposed to downside risks. The recovery remains below expectations”. Padoan also underlined that today “we are in a context characterized by an increase in the preference for savings and low investments. Markets have incorporated this new normal.”
Then there are the geopolitical uncertainties, also linked to the results of the referendums, “as happened with the one on Brexit – said the minister -. Faced with these uncertainties, families are increasing their precautionary savings". In any case, Padoan noted that “Italy is growing, despite an uncertain international situation. The recovery is underway and the labor market is improving even with the reduction of incentives”.
PADOAN: MOVEMENT AIMS AT DEVELOPMENT AND CONSOLIDATION OF ACCOUNTS
Padoan then claimed that the government's economic policy continues on the "narrow path" between support for growth and consolidation of public finances: "Debt continues to fall and the government's policy continues on the narrow path in support of the development and consolidation of balance. With limited resources, the quality of public finance action is even more important than quantity”.
PADOAN: HUGE EFFORT ON MIGRANTS UNDER MANEUVER
The minister then announced that “the budget law also contains measures to deal with the emergencies of the earthquake and migrants. On this latter aspect, Italy is making a huge effort which benefits Italy and also Europe”. Padoan responds indirectly to the perplexities, that in the letter sent to Rome on the contents of the maneuver he had also asked for clarifications on the resources used for the management of migrants.
VISCO: NEW MERGERS ARE NEEDED AFTER BPM-POPULAR BANKS
On the banking side, according to Visco, new mergers "will have to follow the important one completed in recent weeks between two former cooperative banks", Bpm and Banco Popolare: "The completion of the transformation into a joint-stock company which must necessarily take place within the end of this year, will be able to facilitate capital strengthening, the recovery of profitability, the improvement of credit quality”.
VISCO: NEW BAD LOANS DOWN TO 2008 LEVELS
As for non-performing loans, "the flow of new non-performing loans in the first half of the year returned to the levels observed in 2008 - explained the Governor -, around 3% of loans. Preliminary information for the third quarter shows that the improving trend continues. In Italy, the deterioration in credit quality, which had sharply accentuated above all due to the long recession, has come to a halt in the most recent period”.
As recalled by the number one of Via Nazionale, since the end of 2015 the amount of non-performing loans has decreased compared to total loans, last June it was 17,7% gross of adjustments and 10,4% net, of of which 4,8% for the non-performing component only. The coverage ratio on non-performing exposures rose from 28,2% in 2011 to 43,6%. The ratio of banks' higher quality capital rose from 11,8% to 15,5%.
VISCO: CONSISTENT SALE OF BAD LOANS COMING SOON
In any case, "the majority of non-performing exposures are concentrated with intermediaries who are overall in good condition - Visco underlined - since they do not need to sell bad loans immediately, they can benefit from higher recovery rates than those implicit in the current market prices. In the near future, a substantial amount of non-performing loans could be sold or securitized (also with recourse to the public guarantee on the senior tranches). However, the timing of the overall return process cannot be excessively compressed. The risks that could arise along this path will be less the more effective the economic policies are in supporting the recovery".
GUZZETTI AND PATUELLI
Previously, in their speeches, the president of Abi and the number one of Acri, Antonio Patuelli and Giuseppe Guzzetti, had railed against the ECB Supervision and the low participation in the Atlante fund.
