Bank of Italy Gov. Visco: ‘Who Knows’ Whether QE Program Will Be Big Enough
Bank’s Governor Says If Quantitative Easing Doesn’t Restore Price Stability, More Will Be Done
“Who knows?” Mr. Visco said in an interview when asked whether the ECB’s announced plans to purchase about €60 billion ($67.2 billion) a month in eurozone government bonds and other assets will be large enough to effectively counter deflation.
Mr. Visco, who is a member of the ECB’s governing council, said the central bank settled on the size based in part on how much the ECB balance sheet has shrunk since 2012—in contrast to the expanding balance sheets of central banks in the U.S. and England—and on market expectations, which were for a slightly smaller bond-purchasing program.
Mr. Visco added in a subsequent email that the bond-buying program, known as quantitative easing, is essentially open-ended. “If medium term price stability will not appear to be restored by the time the program ends, more will be done!” he wrote.
Mr. Visco added that he would have preferred that the ECB’s quantitative-easing program included greater international risk-sharing, as opposed to national central banks being responsible for most losses on the bonds that they purchase. So-called mutualization would have been “the right approach,” he said. In the eurozone, there should be “shared responsibilities.”
Mr. Visco also said the Italian banking system “has been extremely resilient,” requiring much less government aid than banks in countries such as Spain and Germany. But he said Italy should consider the creation of a “bad bank” that would house toxic or unwanted assets from Italian banks to accelerate the cleanup of their balance sheets. An Italian bad bank “is an interesting idea,” he said.