MNI INTERVIEW: ECB NPL Rules May Hit Italy Econ- Confindustria

--Market News Exclusive Interview With Confindustria Head

--New ECB Rules On NPLs Could Stifle Credit Flows

--EMU Reform Should Boost Governance, EU FinMin A Good Move

By Silvia Marchetti

     ROME (MNI) - Tougher European Central Bank rules on bad loan risks stifling

credit flows to the real economy and a more restrictive monetary policy ahead

could jeopardise growth, Vincenzo Boccia, president of Italy's leading industry

lobby group told Market News in an exclusive interview.

     Boccia, head of Confindustria, warned that the end of the ECB's asset

purchase program, topped with a less accommodative stance, could hinder the

ongoing economic recovery if such risk is not adequately offset by strong

national and European initiatives. 

     "This is also the reason why public deficits and debt must be kept under

control by focusing on growth to reduce their burden on public finances," said

Boccia. 

     The introduction of new rules on non-performing loans (NPLs) must be

averted because, if applied, "they will trigger an investment crunch, a move in

the opposite direction to the one we need to go now," he said.

     Boccia argued that the creation of a common European Union capital market

would benefit credit flows, but that sustainable growth remained the "great

precondition" to boost lending to both business and households. 

     "Credit support, especially to small and medium enterprises, must be a top

priority for Italian and European policy. We need to favour the real economy,

that creates wealth and employment," he said.

     If this goal is missed, "nobody should be surprised if there are waves of

estrangement and delusion in the great European dream," Boccia said. 

     --KEEP REFORMS ON-TRACK 

     The head of Confindustria, a lobby group for some 160,000 firms, was

confident that Italy was finally out of the recession tunnel but warned against

making policy mistakes if the country wanted to accelerate the ongoing economic

recovery. 

     Boccia appealed to Italy's politicians, currently caught up in campaigning

as the country heads towards general elections in March, to keep pro-growth

reforms in place no matter who wins. 

     "We are facing a delicate moment and must call on everyone's sense of

responsibility. It is paramount not to undo all policies and reforms which have

determined today's successes, including the Jobs Act and the Industry 4.0 law,"

he said. 

     Confindustria last week upped its GDP forecasts to 1.5% for 2018, up from a

previous 1.3%, and to 1.2% in 2019.

     He didn't rule out the chance of an uncertain electoral outcome due to a

"fragmented  political picture" likely to emerge from the ballot boxes. However,

he said he was confident that as in the past, Italy "will succeed in finding a

solution to assure stability and governability".

     --EUROZONE REFORM WELCOME

     Boccia welcomed the eurozone reform plan launched by the European

Commission, especially if it helps boost governance and introduce permanent

pro-growth pillars. 

     "Let's not forget that Europe is the world's richest market. This is why we

must exploit growth to reduce social inequalities and fight poverty," he said.

Europe must also put in place ambitious policies to support the rise of new

"industrial champions" able to successfully compete on world markets.

     The idea of creating a European Finance Minister is positive, said Boccia,

provided it leads to greater convergence in fiscal policies across member states

and to a more efficient EU policy framework.   

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

[TOPICS: M$E$$$,M$I$$$,M$X$$$,MC$$$$,MI$$$$,MX$$$$]