Italy can confront current financial market tension without asking for the activation of the European Central Bank's bond-buying scheme, Bank of Italy Governor Ignazio Visco told daily La Stampa on Sunday. While a deep recession and political uncertainty will weigh on the country in coming months, the central banker said he believes Italy has overcome the worst phase of the debt crisis.
The ECB's Outright Monetary Transactions (OMT), or bond-buying scheme, is a tool created to face deep financial difficulties, said Visco in the interview.
"Italy suffered from such deep problems at the end of last year but it reacted and was able not only to maintain market access, but also to reduce tensions," Visco said.
Rome's 10-year borrowing costs soared to a euro lifetime high of nearly 8 percent in November 2011. At that time the country was under strong pressure to ask for international aid, but a new technocrat government headed by Mario Monti was able to reassure markets through an austerity programme. Italian government reforms and the build up of effective euro zone financial backstops - the European Stability Mechanism and the ECB's OMT - helped Rome reduce market pressure to bearable levels, according to the central banker.
"Now the situation is characterised by lower tension, while the (ECB's bond-buying scheme) was created to face really acute situations in which borrowing costs are pushed well above what is justified by a country's economic fundamentals," Visco said.
Italy's debt costs have fallen sharply compared with the peak of the crisis, Visco said. Some analysts suggested last week Rome should ask for the ECB's support after Monti's recent decision to leave office early rattled financial markets.
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