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.