Bank of Italy Governor Fabio Panetta on Thursday called on the government to maintain the good impression it has given about the management of the “Italian public finances” amid the energy and geopolitical crisis triggered by the Iran war.
Speaking at a conference at the foreign ministry, Panetta said this good perception has “kept us sheltered up to now”.
“High levels of public debt in many economies limit fiscal space and increase market risks,” he said.
“So shifts in global investors’ perception of risk can quickly translate into tensions with sovereign bonds and capital flows.
“The tensions in the energy markets are not only worrying because of the immediate impact on inflation and growth, also because of the potential repercussions on financial stability,” he continued “In the presence of high volatility and uncertainty, pre-existing fragilities could become channels to amplify shocks”.
