Visco, extreme uncertainty, but together we will make it – Economy


“Uncertainty is strong today” but “‘today from many quarters it is said” together we will make it. “We say so too”. So the governor of Bankitalia Ignazio Visco stressing that it should not be said, however, “only with rhetorical optimism, but to collectively take on a concrete commitment”. “We need a new relationship between the government, real economy and finance companies, institutions, civil society; we may not call it, as has been suggested, the need for a new” social contract “, but also in this perspective it is necessary to proceed to a orderly confrontation and create a constructive dialogue “. Finally a clear appeal: “Nobody should lose hope,” says Visco.

“Each country must use the resources made available by the European institutions with pragmatism, transparency and, above all, efficiently”. Visco in the final considerations he warned, however, that “European funds can never be ‘free'” because “European debt is everyone’s debt”. Visco defines the latest EU proposal of the 750 billion fund “an important opportunity”. “Italy – he adds – is called to an extraordinary effort to exploit the opportunities offered better than it has done in recent decades”

“In the baseline scenario, the decline in production in 2020 would be 9%” and in 2021 the GDP “would recover about half of the fall”. For Visco “on more negative hypotheses, even if not extreme (…) the product would decrease by 13% this year and the recovery in 2021 would be very slow”. Visco stresses that “it will take time to return to a normal situation, presumably different from what we were used to until a few months ago”.

The “depth of the recession, in the medium term”, “cannot fail to have effects on bank balance sheets. The increase in impaired loans will have to be addressed in time, making use of all possible instruments, including those for restructuring and their sale” . “If necessary”, “you must be ready to follow solutions that safeguard the stability of the system by evaluating” “preventive instruments for banks that find themselves in a serious, even if presumably temporary, situation”.

The governor of the Bank of Italy Ignazio Visco acknowledges that there have been “frictions” and “some slowness” in the flow of liquidity to the companies envisaged by the government measures also due to the “exceptional amount of questions” and “problems of an organizational and differences in IT equipment “but he says” confident that in the coming weeks with the cooperation of all those involved, improvements will be recorded “also with some amendments to the standard.

“In the macroeconomic framework of the Government, a deficit of 10.4 per cent of GDP and an increase in the weight of public debt on the product of 21 percentage points to 156 per cent are forecast for 2020. Such a heavy bequest requires a awareness of the dimension of the challenges facing us “. The text explains that “with an economy growth rate of between one and two percent”, a drop in the spread, and a primary surplus of 1.5% “would be enough to reduce the debt burden on the product of about two percentage points on average per year “.

“What differentiates us above all from other advanced economies is the incidence of the underground economy and tax evasion which results in an effective tax burden that is too high for it to fully respect the rules”. Visco who calls for “a profound rethinking of the structure of taxation, which takes into account the renewal of the social protection system, must set itself the objective of recomposing the tax burden for the benefit of productive factors”. For Visco “the injustices and the profound distorting effects that derive from tax evasion and undeclared reverberate on the ability to grow and innovate businesses; they generate incomes at the expense of the efficiency of the production system”.

“We are going through the biggest health and economic crisis in recent history. Here, as in many other countries, doctors and nurses have had to bear unprecedented pressure. Thanks to their commitment, given in very difficult conditions, even worse consequences have been averted. Our first thoughts go to the many who have been affected in this effort, to all the victims of this tragedy, to their families “. These are the words of the Governor of the Bank of Italy addressed to the staff and victims of the pandemic by reading the Final Considerations.

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