Bank of Italy Governor Ignazio Visco
said Thursday that Italy's high bond spread was starting to have
an impact on the real economy in terms of higher lending costs
for firms and households.
"The spread is over 270 basis points, more than double the
level of early 2018, before the general election," Visco said.
"This exposes Italy to financial-market volatility".
He added that fears Italy could drop the euro as its currency
had contributed to the rise in the spread between Italy's
10-year BTP bond and the German Bund.
"The premiums on the CDSs (credit default swaps) suggest that
the spread on Italian bonds rose both because of the increase in
credit risks and because of the risk of the bonds being put into
another currency".
The spread crossed the 290-points mark on Friday, before
dropping back below it, after Deputy Premier and Interior
Minister Matteo Salvini reiterated his assertion that Italy
should feel free to breach the EU's 3% deficit rule if it needs
to in order to boost the economy and create jobs.
On Thursday Salvini said the rise in the spread was linked to
the "death throes" of opponents in the establishment who are
against his drive to change the European Union.
Premier Giuseppe Conte, meanwhile, admitted he was concerned
about the rise in the spread and said the government was keeping
an eye on it while stressing that "this does not mean it is
necessary to be obsessed by the index".
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