The behavior of banks holding government bonds "plays a key anti-cyclical and therefore stabilizing role", Economy Minister Pier Carlo Padoan told a Senate hearing Wednesday. "Any change could cause negative and destabilizing effects on the European banking system, on the management of sovereign debt, and therefore on the real economy," he said, adding the European Central Bank (ECB) and the European Commission (EC) have already pointed out the risks of capping the amount of sovereign debt that can be held by any given country's banks.
Bank of Italy Governor Ignazio Visco said Monday that "in his personal opinion", the potential risks of capping bank-held government bonds outweigh the potential rewards. "The benefits are uncertain, while potential costs could be significant," he told a conference on the future of European government bond markets. "A more cautious approach would be to wait for the financial system to make a full recovery as it adapts to significant overall reforms implemented since the beginning of the (economic) crisis," Visco said.
Premier Matteo Renzi said last month there is "no possibility of a path on State bonds being accepted without an overall strategy". "Today the priorities of European economic policy are growth and investment," Renzi said on April 22 in New York.
"The Italian position will be very clear, but the last thing to do is cause...arguments within the eurozone".
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