ECB’s Visco: Widening of Italy-German yield spread reflects the risk of default
|Bank of Italy Governor and ECB governing council member Ignazio Visco was out on the wires in the last hour, commenting on Italy's debt situation and said:
• Italy cannot narrow the growth gap with EU with higher spending.
• Italy’s slow growth caused by companies’ low productivity.
• Economic slowdown more marked than the rest of the EU.
• Policies guaranteeing balanced financial conditions are needed to protect savings.
• Foreign investors sold 82 billion Euros in sovereign bonds in the May-August period.
• Widening of Italy/Germany spread reflects the risk of default and redenomination in equal measures.
• Spreads impacted by doubts about Italy's policies, EU relations.
• If the rise in Italian state bonds is not reabsorbed it will cost over 5 billion Euros in 2019.
• The rise in funding costs and depreciation of banking shares will make access to credit harder for families and companies.
• Italian debt is sustainable but the determination to keep it such must be clear.
• GDP growth this year will be 1%, lower in 2019, without taking into account budget measures.
• Italy can cope with the end of low interest rates, provided it sticks to the fiscal policy aimed at budgetary stability.
• Italy must sell in 2019 400 billion Euros in state securities to refinance maturing debt and cover year's deficit.
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