ROME, Feb. 12 (Xinhua) — Now is not the time for Italy to stray off the path of reform, which has brought the country out of recession, Italian Prime Minister Paolo Gentiloni said Monday.
The center-left premier made the remarks at the signing of a credit recovery protocol by Italian industrialists association Confindustria and the Italian Banking Association (ABI) to free up financing for small and medium businesses, the backbone of Italy’s economy.
Gentiloni said businesses need a favorable economic climate, confidence, and above all, credit — the “essential oxygen for their activity”.
“Now is not the time to stop being committed to rigor, competence and reform,” the center-left premier added.
“Italy does not need to derail and throw away the work done in the past few years,” he said in an apparent warning to opposition parties ahead of a March 4 general election.
Credit to businesses stokes economic growth, generating jobs and reducing social inequalities, Gentiloni concluded.
The agreement, also known as the Marciano Pact, will act as an “accelerator” to the process of shedding non-performing loans (NPLs), said Economy Minister Pier Carlo Padoan, who also attended the signing of the agreement at the premier’s office in Rome.
NPLs accumulated on Italian banks’ books as a result of the global financial crisis of 2007. Large numbers of NPLs can choke a country’s economy because banks are no longer willing to lend money to businesses.
The center-left Gentiloni government, as well as the previous administration of Matteo Renzi, fielded a number of reforms that succeeded in shoring up the country’s credit and financial system.
Net NPLs “fell from 86 billion euros in December 2016 to 64 billion euros in 2017” thanks to government efforts, pointed out Padoan, who served under both center-left administrations.
A January 2018 bulletin from the Bank of Italy saw an “expansion of credit” to families and businesses and a drop in existing and new NPLs.
At the same time, Italy’s industrial production rose by 4.9 percent in December 2017 compared to December 2016, according to ISTAT statistics agency.
“Recent evidence confirms that this is a virtuous cycle and we are approaching a return to normality in the banking system, which is not just the pre-crisis normality but a reinforced one,” Padoan said on Monday.
ABI Director Giovanni Sabatini said the accord will “ensure better credit” to businesses through a “modern, innovative and flexible system of guarantees…that will put us in line with European best practices”.
“It will give a further impulse to Italian banks’ ongoing process of shedding their NPLs,” Sabatini said, pointing to a 25 percent reduction in the stock of net deteriorated loans in 2017.
Citing a 30 percent rise in private investments and a 7 percent rise in exports, Confindustria President Vincenzo Boccia said “we are here in a spirit of great loyalty, because we know the success of your government has been the success of our country”.
However, according to a January 18 report by CGIA think tank, large companies, not small and medium businesses, are getting the lion’s share of bank credit.
The top 10 percent of credit applicants by company size obtained 79.8 percent of total bank loans (1.5 billion euros) extended as of September 30 last year, CGIA said based on central bank data.
“The remaining 90 percent of clients obtain just over 20 percent of loans,” according to the CGIA report.