“Mes, the reviews are modest. Taxi? The end of the hikes is not far off»- Corriere.it

The changes to the European Stability Mechanism are modest. Ignazio Visco, governor of the Bank of Italy, thus intervenes in the debate on the reform of the treaty which regulates the so-called Salva-Stati Fund and which is only awaiting ratification by Italy to enter into force. «The revision of the ESM is, all in all, modest and does not make it worse and there is an important element: to use the very high available funds for banking crises and I believe that we need to work to better design the use of the banking backstop », underlined the outgoing governor during an interview with Sky Tg24. However, Visco recalled the perplexities expressed at the time regarding the “communication strategy” of the instrument. “I said that the use should not be perceived as a tool to restructure the country’s debt because otherwise it increases the spread,” he warned. “So I was not against revision but against interpretation.”

Break on rates within the year

As for the ECB, Visco predicts that the ECB’s rate hike path should soon be interrupted, giving some breathing space to debtor households and businesses. “It is right to maintain a restrictive stance” to bring inflation under control but “we must be careful and cautious” because the effects of the increase in the cost of money “are seen over time” with a delay of one and a half to two years Visco warned “We will maintain this restriction for a while until there is effectively a return to price stability,” he added. That moment may not be far off. «The phase of rate stabilization by the ECB is approaching and «certainly» will start by the end of the year, anticipated the governor.

The risks of the variable mortgage

In the meantime, however, those who have chosen the variable rate for their mortgage have suffered an increase in installments of up to 70% in the last year due to the sudden monetary tightening implemented by the ECB to counter inflation. An option which, if adopted in the last few years of zero interest rates, is difficult to explain and calls into question information in both senses: who, the debtor, should have been aware of the dangers inherent in the floating rate and who, the bank , should have illustrated them. «Mortgage rates can be fixed and variable, whoever chose the variable must also have the perception that, being variable, if there had been an increase that would have been a higher cost», explained Visco. “Not everyone is able to predict, on the one hand there must be more information, but on the other hand also the willingness to understand the risk”.

No to bank dividend excesses

On the other hand, variable rate mortgages “are only a third” of the total and “those stipulated from the beginning of 2023” have a limit on the installment that can be reached. “There are measures underway that will help those most in need,” Visco added. The increase in interest rates and variable installments therefore does not involve a “systemic problem” and financial stability because “household debt in Italy is the lowest in Europe” and because “the banking system is solid and overall remained solid”. However, the “risks associated with a deterioration in credit quality” should not be overlooked: therefore, banks must “set aside to face the risks” and not “exceed in the distribution of dividends”.

The favor for the minimum wage

Visco then addressed the issue of the minimum wage, saying he was in favor of its adoption by law. «It is said that in Italy there is already a contractual wage, in the various national labor contracts, but there are many who are not covered by these contracts and they are those of those people who I believe should be defended by a reasonable salary». he said, specifying that he did not want to comment on the minimum wage levels to be fixed. “There is a component of people who work, who carry out very precarious jobs – explained Visco – and there are surveys on young people who, after several years of these precarious jobs, then do not find permanent employment capacity, as well as saying that there are many young people outside the labor market. My position is that, in these cases, we need to be careful of activities that underpay those who work extraordinarily».