Draghi Says Italy Can Withstand Slowdown Without Risk to Debt

(Bloomberg) -- Italy’s economy is strong enough to handle a slowdown and its debt will remain manageable even as European Central Bank stimulus winds down, Prime Minister Mario Draghi said.

“I don’t see risks for Italy’s debt,” he said on Friday after a meeting of European Union leaders in Versailles, France. “We are ready to withstand a temporary slowdown in growth, and debt sustainability will not be impacted.” 

The ECB this week unexpectedly advanced its slowdown of bond buying to the start of May, as it grapples with inflation pressures after Russia’s invasion of Ukraine. The program, which has been supporting Italian debt, could end as soon as the third quarter.

An economic bounceback from the worst of the pandemic has allowed the government to limit its mammoth borrowings to around 150% of output, despite more spending to support families and companies. The continued rise in energy prices is hitting Italy hard, but Draghi was sanguine about weathering the turmoil.

“Last year’s growth was exceptional,” he said. “We can get to the end of this year with good growth performance, even if the war has clouded prospects.” 

Draghi added that Italy is not yet a state-of-war economy, and that there has been excessive alarm. “Being ready does not mean that it will have to happen,” he said.

The former ECB chief also commented on EU fiscal policy, which he said must continue “to be expansive and centered on investments, otherwise our climate and defense goals can’t be reached.” 

©2022 Bloomberg L.P.