Bank of Italy Governor Calls for Innovation and Warns Against Trade Fragmentation

During his address at the annual gathering of market operators Assiom Forex, Bank of Italy Governor Fabio Panetta presented an optimistic, yet cautionary vision of the economy. He noted that global trade has not suffered the collapse predicted a year ago, thanks to technological innovations and corporate flexibility. Panetta expressed conviction that a complete rupture of ties between the USA and its historical allies is unlikely due to the systemic role of the American economy. Simultaneously, he criticized protectionist tendencies, pointing out that multilateralism remains the best defensive strategy. The governor noted that economic decisions are increasingly dictated not only by efficiency but also by security strategy. Since the energy crisis triggered by Russia's invasion of Ukraine in 2022, European Union countries have been striving for strategic autonomy, which requires a deep restructuring of supply chains and energy markets.Regarding Italy's domestic situation, Panetta stressed that for five years, the country has recorded GDP growth in line with the EU average, breaking decades of stagnation. Particularly important is halting the divergence of the country's south from the rest of Italy. However, according to the governor, the current development model is unsustainable due to unfavorable demographic trends. He indicated that increasing employment while maintaining low wages will not ensure long-term competitiveness. The key to success is investment in human capital and artificial intelligence, whose development is an opportunity Europe cannot postpone. „Un modello di crescita fondato sull'espansione dell'occupazione e dei salari contenuti non è sostenibile alla luce delle tendenze demografiche.” (A growth model based on expanding employment and contained wages is not sustainable in light of demographic trends.) — Fabio PanettaIn the financial sphere, the governor assessed the condition of Italian banks as solid, confirmed by, among other things, the record results of the Unipol group, which in 2025 achieved a profit exceeding 1.5 billion euros. However, he appealed to financial institutions not to be overly cautious in financing innovative projects. Against the backdrop of discussions about market stability, Panetta noted a shift from a phase of widespread optimism to a more cautious risk assessment by investors. In monetary policy, he advocated for maintaining flexibility by the ECB, considering both pro-inflationary risks related to commodities and price-suppressing factors stemming from the condition of financial markets. 0,7% — Italy's GDP growth last year Geopolitical events, such as the fourth anniversary of the war in Ukraine or tensions between the USA and the EU, pose an additional burden on Western unity. This is evidenced by, among other things, the postponement of the Meloni-Macron summit to June 2026, scheduled to follow the G7 leaders' meeting in Evian. Panetta emphasizes, however, that it is precisely in the era of "permacrisis" that Europe must be able to move beyond ad-hoc reactions and focus on joint actions in the areas of energy and capital markets to maintain its weight in the global economy.