Italian Minister Giorgetti Warns Ecb Of Recession Risks

Italian Minister Giorgetti Warns Ecb Of Recession Risks by Andrew Blumer last updated on April 28, 2023

Italian Minister Giorgetti Warns ECB Of Recession Risks

The Italian economy's outlook has improved as of late, but the higher interest rates from the ECB pose a serious risk to growth. That's why one of Italy's ministers sent a warning to the ECB (European Central Bank)!

Giancarlo Giorgetti made it clear that the use of monetary policy as a tool isn't enough to fight inflation. He added that the fight against inflation could have a higher price in the form of a recession.

Just last month, Giorgetti criticized the central bank's decision to introduce a 50 bps rate hike. At that time, the banking sector was under heavy turmoil, and there was a serious risk to Credit Suisse.

Italy Economic Forecast For 2023 Set At 0.6%

The minister also confirmed that several improvements in Italy's economy were made during the first half of the year. Based on this, Italy's upgraded economic growth forecast for 2023 is now somewhere around 0.6%.

He also added that the European Union would have difficulty reintroducing its budget rules. For now, these rules remain suspended until 2023's end.

Earlier, the crisis years of COVID gave way to relaxed budgetary rules that allowed the European economies to register growth. But now that Europe is going back to an environment of higher interest rates amid inflation, it will become difficult to achieve positive economic growth.

In February 2023, the inflation reading in Italy was recorded at 9.2%, which is very close to the double-digit figure of 10%. Although it has been going down as of late due to high-interest rates, it has introduced a new risk to the Italian economy.

According to the Italian minister, the country is now at a greater risk of facing a recession due to the high-interest rates. We have already seen a short episode of the banking crisis in the USA and Europe already.

There are fears that the banking crisis we saw was just the beginning and a more serious banking crisis is just waiting around the corner.