Debt of Italy at risk in the medium term. A certificate is the report on the sustainability of public finances in the European Union that warns our country from risks “sustainability” of the finances due to a high level of debt “at the end of the projections” in 2026 and a “high sensitivity to possible shocks to the nominal growth and interest rates. ” Danger that concern, in the opinion of Brussels, even the bad debts. Although, with the implementation of the pension reform adopted in the past, does not seem to be risks to fiscal sustainability in the long run, assuming the full implementation of the reform and on the condition of maintaining the structural primary balance to the level foreseen by the Commission for 2017 (2.5% of GDP) over that time horizon. Not long in coming, however, the answer to sources of the Ministry of the Treasury that, the report confirms that the Italian public finances “does not present a risk in the short term and are by far the most sustainable of all in the long term.” “The heavy debt makes the country more vulnerable in the event of external shocks”, and this is why Italy is classified as “high risk”. But the government, reaffirm the sources, “scheduled in 2016 the debt down for the first time in eight years.” While the bad debts, the sources said the MEF, there is “a rate of coverage of impaired loans higher the European average” and a “liquidity indicator well positioned in comparison” with Europe, with institutions “relatively little exposure” to emerging countries and “derivatives”.
THE GDP – EU Commission forecasts show a net decline (1.5%) the structural primary balance from the recent peak of 4% in 2013 and up to 2.5% estimated in 2017. The Real gross domestic product saw a 0.9% growth in 2015 and an estimated 1.5% in 2016 and 1.4% in 2017.
THE DEBT – The development trend of gross domestic product will bring the public debt, after peaking at 133% in 2015, to decline slightly in 2016 to 132.2% and more significantly in 2017 (130%). “The public debt would still be very high, thus representing a major source of vulnerability for the Italian economy. The high public debt limits the country’s ability to respond to economic shocks and leaves exposed to possible increases in sovereign bond yields, while the space for productive public spending is also limited by the interests (4.3% of GDP in 2015) .
SHORT PERIOD – By the year “no significant risk” for Italy, it notes the committee, according to which the government gross debt and equity financing and in particular the gross percentage of GDP “does not represent a challenge in the short term. ” Unlike the speech on the size of the stock of public debt that “is critical” while the structure of the financing of public debt in terms of maturity in terms of creditors (residents and nonresidents) “does not result in short-term risks.” In contrast the share of bank credits in suffering is “a source of risk in the short term.”
MEDIUM TERM – The Italian public debt, detects Brussels “will continue to decline,” reaching “125% of GDP in 2020 and about 110% in 2026 (the last year of projection).” A reduction “of about 20 percentage points. on a horizon of 10 years “that depends on a primary surplus” constant at 2.5% of GDP up to 2026 “. This value, says the commission, “could be maintained over the 10 years” since many EU countries historically have already registered for a long time values like this and this underlines “the need for a strong determination to improve fiscal policy to order to ensure compliance with the rules of the debt. ” However, “the still high debt ratio Italian at the end of the projections (in 2026), based on the assumption of a tax policy unchanged at a relatively high” primary surplus “for an extended period of time, leading the EU to say that the country’s debt “is high risk in the medium term”. Given the high initial debt, adds Brussels, “adverse shocks, growth and interest rates may have a considerable impact on developments in the debt” that can lead to the probability of the Italian debt in 2020 is higher than that of 2015 (133%). Hence the indication of a structural primary balance of about 4% (precisely 3.8%) in the period 2017-2026 “significantly higher” (1.3%) than expected for 2017. That is, in 2017 for respect the rule of debt Italy should resume normal pace of fiscal adjustment after two years of flexibility.
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