Italy can ride out eurozone financial tensions without asking for the activation of the European Central Bank’s (ECB’s) bond-buying scheme, Bank of Italy governor Ignazio Visco told yesterday’s edition of La Stampa newspaper.
The central banker said a deep recession and political uncertainty will weigh on the country in coming months, but asserted that Italy had turned the corner in the debt crisis.
The ECB’s Outright Monetary Transactions (OMT), or bond-buying scheme, is a tool created to handle deep financial difficulties, he added. “Italy suffered from such deep problems at the end of last year, but it reacted and was able not only to maintain market access, but also to reduce tensions,” Visco said.
Rome’s ten-year borrowing costs soared to a euro lifetime high of nearly 8 per cent in November 2011.
At that time the country was under strong pressure to ask for international aid, but a new technocrat government headed by Mario Monti was able to reassure markets through an austerity programme.
Italian government reforms and the build-up of effective eurozone financial backstops – the European Stability Mechanism and the ECB’s OMT – helped Rome reduce market pressure to bearable levels, according to the central banker.
Italy’s debt costs have fallen sharply compared with the peak of the crisis, Visco said.
Some analysts suggested last week that Rome should ask for the ECB’s support after Monti’s recent decision to leave office earlier than original planned had rattled financial markets.