Bank of Italy Governor Ignazio Visco's views on European recovery
Fiscal adjustment was indispensable. Its negative short-term effect on economic activity was the price paid for averting more serious consequences
A few days ago, the Governor of the Bank of Italy, Ignazio Visco, took part to the Council of Councils Regional Conference clarifying his views about recovery, in both Italy and Europe. The conference took place in Rome, thanks to the support of the Italian Ministry of Foreign Affairs and the IAI (Istituto Affari Internazionali) think tank. It is an international initiative launched by the Council on Foreign Relations to connect leading foreign policy institutes from around the world in a common conversation on issues of global governance and multilateral cooperation.
According to Mr. Visco, in Europe, "recovery is now at hand, although downside risks remain significant. If we are to seize the opportunity, we cannot relax our efforts" and keep on working on structural reforms. The Italian Governor believes that "the key to success will be a shared determination to advance towards a full-fledged European Union. In the current stage, the test of our resolve is the building of an effective banking union."
According to Mr. Visco, the European Union is currently facing two risks: default in some countries, and the possible breakup of the Euro. Although believing that "confidence in the irreversibility of the euro is the key to avoiding collapes", the Italian Governor is aware that European countries are not the only ones who need to put their own house in order, as the EU needs to do the same.
While focusing on the Italian situation, Mr. Visco pointed out that "the recession has been longer and deeper in Italy than in most other countries", but also that Italian recession is clearly coming to an end, with the main indicators, such as GDP and family spending, registering a gradual improvement. Moreover, it is significant to highlight that this is happening despite the threats the current political instability is posing to recovery.
In conclusion, Mr. Visco stressed that "fiscal adjustment was indispensable in the more economically fragile countries, including Italy, to ward off the risk of losing access to the market, which would have precipitated the crisis". Its negative short-term effect on economic activity was the price paid for averting more serious consequences.
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