In an address for the 102nd World Savings Day in Rome, Bank of Italy Governor Fabio Panetta warned that further European Central Bank (ECB) interest rate increases could be necessary and called for capital market integration and pension reforms to direct savings toward productive investment. Euro area inflation has doubled since February to 3.8%, almost entirely because of energy prices, and is expected to remain above 2% for several quarters. The ECB raised rates by 50 basis points between June and September and left them unchanged on Oct. 29. Further monetary policy decisions must also account for higher bond yields, which are already tightening financial conditions. The euro area's savings exceeded domestic investment by an average of around EUR 300 billion annually over the past decade. The difficulty lies in deploying savings profitably within Europe, where fragmented capital markets constrain specialized intermediaries, including private equity and venture capital funds that can finance innovation and diversify risks. Implementation of the recent European agreement on market integration should draw on the Single Supervisory Mechanism, combining European leadership with national authorities' expertise. Completing banking union requires common deposit insurance protecting all depositors while accounting for small banks' characteristics. A safe, liquid European asset would provide an investment benchmark and attract foreign capital, rather than represent a step toward fiscal union. In Italy, supplementary pension membership has risen above 10 million, or 40% of the labor force, but low incomes and unstable employment constrain younger workers' participation and regular contributions. Many pension funds remain small, and some impose high costs on members, making further consolidation desirable. Simple, inexpensive savings products could encourage earlier participation. Investment strategies that reduce equity exposure with age, alongside limited allocations to diversified portfolios offering higher risks and returns, could improve outcomes for younger savers and finance productive investment. Members' interests must remain the guiding principle for investment decisions.
Bank of Italy Governor Fabio Panetta sees possible need for further ECB rate rises and urges capital market integration
At World Savings Day in Rome, Bank of Italy Governor Fabio Panetta warned that additional European Central Bank rate increases could be needed as energy costs keep inflation above target. His recommendations included integrating European capital markets to finance innovation and consolidating Italian supplementary pension funds to reduce costs. Pension investment strategies should reflect younger savers' longer horizons while prioritizing members' interests.