Italy’s finance minister said he was confident the economy would return to growth in the fourth quarter and that the upturn would accelerate into 2014. The government expects that national output will expand by 1.1 per cent next year, a projection which is significantly above the 0.5 per cent year-on-year growth most analysts predict. Istat, the national statistics bureau, and the Bank of Italy both forecast a 0.7 per cent expansion.
The 71-year-old technocrat, who spoke during a visit to London to meet international investors, defended his forecasts. “We think that analysts have not fully taken into account the impact of the [expansionary] measures that we have taken particularly the very big effort to reduce arrears in local governments", he said.
Mr Saccomanni also mounted a defence of Italy’s banking system, which critics fear has been dwindling under the weight of an increasing number of bad loans. Analysts believe that Italian lenders will come under intense scrutiny by the ECB as the central bank embarks in its audit of eurozone banks next year.
The finance minister acknowledged that some Italian banks may have to raise extra capital on the markets or shed some assets as a result of the ECB’s balance sheet assessment. But he ruled out the risk that any banks will be resolved or that creditors will be imposed losses via a so-called “bail in”. “In Italy we don’t see that Italian banks would have any need to have recourse for this type of instruments or facilities,” he said.
In fact, the finance minister stated that Europe should be careful about the unwarranted consequences of a regime which was overly reliant on resolution and “bail in”. While the Italian government agrees that creditors should take a hit when a bank is resolved, solvent banks requiring additional capital should be treated differently and their creditors spared from losses.
Excessive reliance on these instruments could “elicit a sort of reaction by depositors, bondholders . . . which might accelerate a crisis even if there is no reason for that", Mr Saccomanni warned. This position mirrors the view expressed by Mr Draghi, and puts the Italian government at odds with the European Commission, which has expressed far greater enthusiasm for imposing losses on creditors even in the case of solvent banks.
“These are delicate issues in which you normally want to use the typical discretionality that is supposed to be the art of central banking", the finance minister added.
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