Italian banks are sound and their solidity is "benefiting the country more than other advanced economies," Bank of Italy Governor Mario Draghi said Wednesday. Italian banking shares are down more than 25% in the past three months amid fears Italy's slow growth and high public debt will hurt their profitability.
Italian gross domestic product, which grew only 0.1% in the first quarter, "likely rose in line with the euro-zone average in the second quarter," he said. Draghi also called for more public spending cuts in Italy's four-year budget plan--now being debated in parliament--saying tax rises would be inevitable otherwise. Draghi has warned that even higher taxation would squelch Italy's economic growth prospects.
Speaking at a banking conference, Draghi noted that Italian banks are growing their loan books more robustly than the euro-zone average and hailed a recent round of capital increases. Italian banks will need EUR20 billion in more capital by 2019, down from a figure twice as high a year earlier, he said.