ECB’s Visco: As Emergency Ends, Fiscal Transfers Must Become Very Selective and Targeted
13 April 2021By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Ignazio Visco on Tuesday played down the extremely low rates at which Italy has been able to borrow, but urged that with the conclusion of the crisis, fiscal policy take a more selective approach to transfers.
In an interview with CNN, Visco, who heads Banca d’Italia, was asked whether he considered it reasonable that Italy was able to issue 50-year bonds paying less than 30-year sovereign debt of the US. The most important thing was that there be policies ‘to overcome this very, very difficult time’, he said. Moreover, he added, debt sustainability depended on economic growth, the magnitude of the debt and the interest burden.
‘And the interest burden now is absolutely very low, and the maturity of the debt is very high, and it may be even higher if these policies of issuing longer-term debt succeed, and I think they may succeed’, he said.
Still, he continued, ‘we have to be very careful going forward. As the emergency is over, we have really to reduce a number of transfers and make them very, very selective and targeted.’
Noting the IMF’s estimate of Italian growth of more than 4% this year, Visco said that this was ‘a real possibility, but at the same time there are risks, and the risks remain elevated.’ He cited uneven global progress in vaccination as well as the possibility that fears of a more persistent crisis would mean ‘permanently higher savings rates or difficulties in really going back to the usual modes of behaviour.’
The Italian economy was displaying ‘some encouraging resilience’, he said, the decline in 4Q having been ‘more limited than expected’. Apart from certain sectors of the economy, people and companies were ‘learning to deal with lockdowns’, he said.
Economic activity was in the process of stabilising, ‘and recovery may start already in this quarter if the vaccination plan that is being undertaken by the government really maintains its promise’, he said.
‘We see the light out of the tunnel, but really, as I say, we should accelerate the way we get out’, he said, reiterating his call for more even progress in global vaccination campaigns.