ECB’s Visco Not Counting on Positive Surprise on Virus Fight
(Bloomberg) -- ECB Governing Council member and Bank of Italy Governor Ignazio Visco said Sunday he’s not counting on advances in the fight against Covid-19 to give any unexpected boosts to struggling economies.
“I don’t believe much in positive surprises,” Visco said during a presentation at an economic conference in Trento, Italy. He downplayed the possibility that a vaccine could swiftly reduce economic uncertainty. “There can be problems with production, problems with distribution,” he said.
For now, stimulus programs are helping boost consumption and have already counteracted the threat of deflation in countries such as Italy, Visco said. “More public spending is needed to sustain an economy hit by a shock.”
At the same time, the recent strengthening of the euro is worrying because it places further downward pressure on prices, and would require the European Central Bank to intervene if that jeopardizes price stability, he said.
Italy stands ready to receive as much as 209 billion euros ($243 billion) in European Union aid funded by jointly issued debt to help its post-coronavirus reconstruction. In addition, the ECB’s bond buying program is keeping borrowing costs low. That helped the government spend 100 billion euros in stimulus for its battered economy.
In a wide-ranging talk, Visco reiterated a statement made Sept. 16 that he expects Italy’s GDP to contract a little less than 10% this year. He also said there are economic advantages if Italy chooses to use European Stability Mechanism credit lines, as they are below-market loans.
Regarding the ECB, Visco said there is no “cacophony” on the board and that his position on the euro coincides with that of the Governing Council.
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