Banca d'Italia: speeches

1. A shock-laden outlook

Speaking in Rome on World Savings Day, Fabio Panetta describes saving as a pact with the future that holds only if savings fund growth and keep their value. Both are being tested by geopolitics, energy and artificial intelligence. The Gulf conflict and the shutdown of the Hormuz shipping lane pushed fuel and gas to record levels and revived inflation, yet output held up, mainly thanks to the AI boost to trade, investment and share prices. That engine is also a risk, because expectations for AI profits can change quickly, as recent tech share corrections and wider credit spreads show. Long-term government yields are climbing in major economies on inflation expectations, delayed fiscal adjustment and heavy borrowing by big tech firms, with possible pressure from Japanese investors repatriating funds. High debt countries suffer most; Italy's deficit has fallen from 9% of output in 2020 to about 3%, bringing rating upgrades, and he urges it to stay the course.

2. Euro-area monetary policy

Consumer price growth has risen from about half that level in February to 3.8%, almost entirely from energy, with limited spillover so far: renewable power has cushioned gas costs, core inflation is near pre-conflict levels, and wages and expectations are contained. Growth of about 1.2% is projected for this year and next, with unemployment at lows and digital services supplying a third of value-added growth. Risks, however, point to higher prices and weaker activity as the conflict drags on and European gas stocks must be rebuilt. The ECB raised rates by half a point between June and September and held them this week. Policy cannot stop energy-driven price rises but must prevent them from embedding in expectations and a wage-price spiral, which would hurt savers and poorer households; further increases may be needed, tempered by tighter market conditions, with decisions taken meeting by meeting and clearly explained.

3. The European paradox

Europe is squeezed between Chinese competition in advanced sectors and a lag behind the United States in AI. US value added grew twice as fast between 2019 and 2025, with productivity, partly from technology, explaining the difference, and the most innovative American software firms spend many times more on research than European rivals. Europe still performs well in publications but lags in patents. Money is not the shortage: the euro area saves a quarter of its income and sends roughly 300 billion euros a year abroad, with about 785 billion flowing to the United States in 2024-25. What lacks are specialised intermediaries, deep capital markets and attractive projects. Households hold only 5% of gross wealth in listed equities against 25% in America, though counting unlisted business stakes lifts the figures to 20% and 35%, and venture capital and private equity are hampered by fragmentation.

4. What Europe should do

He backs the Savings and Investments Union, with larger institutional investors, easier cross-border activity and stronger European market supervision modelled on the banking supervisory mechanism, which blends central leadership with national knowledge. He also wants the banking union completed, with deposit insurance covering all depositors and a design that avoids splitting large and small banks, plus a safe, liquid European asset to attract foreign capital and strengthen the euro. Finance must be matched with a true single market, harmonised rules, competitively priced energy and joint research and infrastructure spending.

5. Saving in Italy

Italian household saving has declined since 2000 because real income per head slipped while it rose more than a quarter in France and Germany, wages stagnated with weak productivity, real interest rates fell, credit became easier, and households aged and shrank. Longer lives now add a reason to save. Supplementary pension schemes have over ten million members, about 40% of the labour force, with assets above 11.5% of output, but young people join less and struggle with insecure, low-paid work, particularly young women. His answers are growth that stabilises careers, wider automatic enrolment, savings tools opened from birth, simple and cheap accounts like those the Commission proposes, financial education in schools, consolidation of small, costly pension funds, and life-cycle plans with a modest allocation to diversified, higher-return assets, always guided by members' interests.

6. Conclusion

Europe and Italy are wealthy but fail to turn that wealth into innovation and productivity. Price stability and prudent public finances protect savings but are not enough; protecting them requires an economy that grows, supports welfare in ageing societies, and gives young people work, independence and a future.

1. A harder world for poorer countries

In a written statement to the World Bank and IMF Development Committee, Bank of Italy Governor Fabio Panetta, speaking for Italy's constituency, said geopolitical conflict and fragmentation disrupted energy, fertiliser and shipping in 2026, raising prices and denting confidence. Emerging and developing economies, with thin budgets and narrow energy supplies, suffer most, and development has stalled in several of them.

2. Priorities for the World Bank

The constituency backs the Bank's reforms, provided they deliver measurable results. It supports job-related training and labour-mobility skills partnerships, citing Italy's programmes with Tunisia and Ethiopia; health plans, African medicine manufacturing and rapid funding for epidemics such as Ebola; digital and energy investment so that AI, which the Bank's 2026 report says could add 0.8 points a year to developing countries' potential growth, spreads widely; and the extended climate plan, including a cautious return to financing nuclear power with the IAEA.

3. Money and governance

It welcomes the push to mobilise private capital through equity, local-currency loans and common standards that would make development projects an investable asset class, while keeping flexibility and countercyclical lending for the poorest and most fragile. It also backs longer share-subscription periods, a fair 2030 shareholding review, a strong IDA22 replenishment focused on Africa, and close monitoring of new procurement rules against subsidised bids. Italy highlights its own Mattei Plan, mining and coffee initiatives and support for Ukraine's reconstruction.

1. Why resilience matters now

Opening the Green Swan Conference in Manila, Banca d'Italia Governor Fabio Panetta said climate change has stopped being a distant threat: it already shapes economic and financial conditions. Cutting emissions remains essential but cannot remove physical risk, and some damage is now unavoidable, so resilience must be built through three tasks: understanding risks, sharing them and reducing exposure. The costs are visible in weaker productivity, lost capital and strained budgets, with extreme weather causing over two hundred billion dollars of direct damage in 2025, more than double the early-2000s level, and shocks that can also move inflation, hitting emerging economies hardest. Governments lead climate policy; central banks and supervisors should simply keep meeting their existing mandates in a changing environment.

2. Understanding the risk

Data on physical climate risk remain patchy in availability, quality and comparability, while hazards are local, arrive in bursts and become harder to predict from history as extremes change. That makes them hard to measure and price, and better information also steers capital towards the places needing adaptation most. Financial institutions should fold climate into credit, market, operational and insurance risk instead of treating it as a separate compliance task. Artificial intelligence can sharpen modelling, forecasting and early warning, but it cannot replace reliable data, sound models and human judgement.

3. Sharing and absorbing the risk

Much of the loss from natural disasters is uninsured, so households cannot rebuild, firms stop producing or default, governments pay after the event and the shock reaches banks. Properly priced insurance does more than compensate: it rewards prevention. Yet cover is hard to expand, because people underestimate risk, premiums can be unaffordable and some markets are thin. The answer is a layered system: private insurers take smaller, frequent losses, reinsurers larger diversified ones, and public backstops handle extreme events while keeping prevention incentives, an approach developed under Italy's 2024 Group of Seven presidency and reaffirmed this year. Catastrophe bonds can widen the capital base, and Italy has introduced compulsory cover against floods, earthquakes and landslides for non-farm firms, with a public backstop. Premiums must stay affordable and reflect risk.

4. Reducing exposure through adaptation

Prevention matters most where exposure is high and fiscal room is thin, because rising debt limits adaptation spending and weak adaptation worsens public finances, a climate-debt spiral. Adapting is cheaper than rebuilding repeatedly, yet it is badly underfunded in emerging economies, held back by few investable projects, uncertain regulation and weak institutions. Governments should build resilient infrastructure, set planning standards and publish hazard information, while development banks use guarantees and blended finance to draw in private money. Technology helps with forecasting and monitoring, but growing data centres raise demand for energy, water and raw materials.

5. Conclusion

Understanding, sharing and reducing risk reinforce one another, and no institution can deliver them alone: governments, insurers, businesses, development banks and central banks each have a part, and international cooperation is essential because shocks cross borders. The aim is for economies to absorb climate shocks without them turning into wider crises; preparing for the future starts with building resilience now.

1. Credibility tested in two ways

In Kyiv, at a research conference jointly organised by the Ukrainian and Polish central banks, the Governor of the Bank of Italy expressed solidarity with Ukraine and argued that central bank credibility sometimes requires standing firm and sometimes adapting. Geopolitical conflict tests the first quality; artificial intelligence and digitalisation test the second.

2. Lessons from the hryvnia

Ukraine's currency turned thirty in 2026. After the 2014-15 crisis, when it lost over half its value and banks were restructured, the National Bank of Ukraine adopted inflation targeting, a more flexible exchange rate and risk-based supervision. These reforms allowed it to keep monetary and financial stability after the 2022 invasion: inflation passed 26%, the policy rate went to 25%, banks kept working and inflation later fell. A new four-year IMF programme approved in February 2026 recognised this record, while alignment with EU banking rules progressed. The lesson is that credibility is accumulated in calm times and proven in extreme ones.

3. AI and the economy

Generative AI is spreading faster than personal computers or the internet did. Central banks must understand it, both as an analytical tool and as a force changing the economy. In the short run, AI investment lifts demand and prices for computing power, energy and specialised staff. In the long run, productivity gains could be large; Bank of Italy research suggests more than one extra point of annual labour productivity growth for Italy. Such a supply gain would normally mean more growth and lower inflation, but its timing and size are uncertain and it also affects incomes and spending.

4. Demand, inequality and gaps between countries

Should AI chiefly generate new kinds of work and lift expected wages, households may spend more and inflation could last longer; if it mainly replaces workers, precautionary saving could bring disinflation sooner. The outcome will be uneven across workers and firms, possibly favouring large companies. Central banks will therefore need to know who gains, not only how much. Between countries, the United States leads in AI investment, which widens its trade deficit and draws foreign money into its stock market, while Europe lags but could still catch up through adoption. Faster adopters may win lasting productivity and market share, with possible swings in exchange rates whose direction is hard to predict.

5. Consequences for policy

The effect of AI on the neutral interest rate is ambiguous: faster productivity pushes it up, while inequality, extra saving or a larger capital share pull it down. Stock valuations built on optimistic AI profits leave room for abrupt corrections. He therefore recommended pragmatism, giving observed demand, activity and inflation more weight than estimates of unobservable variables, and investing in skills and models.

6. Supervision and payments

AI can improve credit scoring, fraud detection and risk control, but common models or a few technology suppliers could spread errors across the system, so supervisors need deeper technical knowledge. New payment providers raise efficiency but also complexity and cyber risk. The two-tier system, in which public money issued by the central bank anchors the private services built on it, should be adapted rather than abandoned. Stable prices, a sound financial system and public confidence in money stay the foundations.

1. Two opposing forces

Addressing the annual meeting of the Italian Banking Association in Rome, the Governor of the Bank of Italy described a world economy pulled between the Middle East conflict, which raises energy prices and revives fears of bottlenecks, and the spread of artificial intelligence, which lifts investment, high-tech trade, share prices and, through wealth, consumption. The United States gains from low energy exposure and technological strength; China relies on manufacturing and tech exports but imports much of its energy. The euro area, already growing slowly, suffers from costlier energy despite more diverse suppliers, and benefits less from AI investment. Household confidence and services expectations have weakened, inflation is close to 3% and should stay above that until early 2027, and renewed hostilities have pushed oil and gas up again. The ECB's quarter-point rate rise in June was a first, measured answer to upside inflation risks; next steps will depend on energy, activity, wages and prices, with the goal of keeping expectations anchored.

2. Markets: a fast rebound, perhaps too fast

The US-Iran conflict that began in late February first caused volatility, falling shares, wider risk premiums, capital flight from emerging markets and higher rates. Hopes of a ceasefire then brought a rapid recovery, with some sectors at record highs and junk bond spreads back down, while government yields stayed above pre-war levels, especially where public finances are weak. He read this partly as an underestimation of risk: shares rose together with interest rates, earnings expectations are very high and equity risk premiums are at twenty-year lows, recalling how crypto-assets long ignored risk before falling. The dollar regained its role as a refuge, helped by oil invoicing in dollars and the US status as a net oil exporter.

3. The AI trade

Demand for AI services has pushed big technology firms to spend heavily on data centres, creating shortages of advanced chips, exceptional margins and soaring chipmaker shares. The boost has been largest in the United States and in Asian markets dominated by semiconductors, smaller in Europe, where gains came mostly from banks and energy firms. Prices of some chipmakers assume that today's margins will last, which new capacity, new competitors, including Chinese efforts, or alternative technologies could disprove. AI service providers face cheaper rival models while borrowing heavily to fund investment, which makes them more fragile if conditions tighten. Korean stocks, heavily exposed to data centre parts, recently dropped about 25%. Investors should manage exposures carefully where optimism is greatest.

4. Italian banks

Bank credit still matters more for Italian firms than elsewhere in large European economies, representing 46% of their financial debt. Energy costs raised firms' cash needs, and banks responded: annualised loan growth to firms rose from 2.3% in February to 6.2% in May, though a long war could make lenders more cautious. Profitability, capital and asset quality are strong, as confirmed by the IMF's recent assessment of Italy's financial sector. Net bad loans have fallen from over 8% of loans a decade ago to about 1%, helped by EU rules on full provisioning that are demanding given slow Italian courts; the Bank of Italy plans to extend this approach gradually to smaller banks' older loans. A few small banks have failed, some because of unlawful conduct, which shows that integrity and governance remain the first defence, since supervisors cannot replace boards or judges. Mergers among banks, insurers and asset managers can strengthen the system if capital, business plans and integration are sound and competition is preserved; the market and shareholders decide once legal conditions are met.

5. Financing innovation

Since 2008, firms in advanced economies have borrowed less from banks and relied more on equity, because rules made lending more selective, services need less credit and intangible assets such as software and patents are hard to value or pledge. Private equity and venture capital funds, whose global assets tripled to $10 trillion between 2014 and 2025, bring both money and expertise. In Italy these funds remain small, focused on restructuring deals and start-ups, so promising firms often go abroad when they need to scale up. Insurers and pension funds, natural long-term investors, place only 0.5% and 0.7% of their assets in private equity. Rules are not the main obstacle; the market is simply too small, creating a trap where scarce investors and small funds reinforce each other. Funds of funds with public support, simpler tax incentives, better financial education and a truly integrated European capital market could break it.

6. Conclusion

Risks cannot be removed, but resilience can be built. Stability is a condition for investment; banks will stay central, but deeper capital markets and more risk capital must complement them. Italy has strong banks, high savings and adaptable firms to build on.

1. A changing world for central banks

Closing a European central bank research network on monetary policy transmission in Rome, the Governor of the Bank of Italy noted that the shocks he called exceptional in 2024 have become permanent features. Geopolitical tension, trade fragmentation and technological disruption hit both supply and demand and can alter how monetary policy itself works. This calls for regular review of how central banks read inflation, judge their stance and decide, while keeping price stability as the mandate. The review of its strategy completed by the ECB in 2025 already moved in that direction. He structured his remarks around three questions: how to handle an energy shock that lifts inflation while weakening activity, how structural shifts alter the outlook and the channels of policy, and how decisions should be taken when uncertainty is this high.

2. The euro area before and after the Gulf war

In 2025 the euro area absorbed US tariffs, Chinese competition and high uncertainty, growing 1.4% (about 1% without Ireland) thanks to employment, defence and transition investment and easier policy, while inflation returned to target. Two warning signs remained: households kept saving more than before the pandemic, and industry stalled under Chinese competition in high-tech sectors, hitting manufacturing countries such as Germany and Italy and possibly reducing future growth potential if it discourages investment. The war in the Persian Gulf then raised costs, selling prices and short-term inflation expectations, while consumer confidence and services activity fell and banks tightened lending.

3. Neither ignore nor overreact

He rejected two simple answers. Looking through the shock underestimates it: damage to infrastructure could keep prices high, and the Strait of Hormuz also carries fertilisers and aluminium. Policy cannot stop energy costs from spreading but must prevent them from shaping wage and price expectations. Yet this is not 2022: demand is weaker, real rates are higher, oil rather than gas is driving the shock, and Europe has more LNG capacity and renewable power. Large cost shocks pass quickly into prices, as firms now reprice faster with digital tools and households recently scarred by inflation adjust expectations sooner, but they also cut spending and investment. The ECB raised its deposit rate by a quarter point in June because projections showed inflation at 3% in 2026 returning to target in late 2027, risks were tilted upwards and expectations had to stay anchored; the decision held up across scenarios. Talks between Washington and Tehran could lower energy prices, but no path is predetermined.

4. The Great Reconfiguration

Fragmentation, AI and digital finance, ageing and climate change are transforming the economy at the same time, a period he called a Great Reconfiguration after the Great Moderation. He drew a cautious parallel with the Belle Époque before 1914, when innovation, trade and financial integration coexisted with inequality, rivalry and an arms race, to show that structural change rarely unfolds smoothly.

5. Three questions for policy

First, trends interact: AI needs energy and water and so complements the green transition, which it can also accelerate, while fragmentation may cut access to inputs and data and ageing may limit skills. This makes it harder to tell lasting change from cyclical swings, and humility is needed with real-time data. Second, transmission may change: AI pricing and digital banking could make inflation and deposit rates react faster, whereas older populations borrow less for homes and goods and strategic investment in resilience responds less to borrowing costs. The effect of a rate change thus becomes less predictable and must be reassessed constantly. Third, the reaction function must adapt: demographics push the neutral rate down while AI and fragmentation act in both directions, so central banks should test decisions against alternative scenarios on energy, supply chains, productivity, finance and expectations, not only a central forecast. Structural change may also shift where financial stability risks sit. Mistaking a lasting productivity gain for overheating would make policy too tight, while treating a temporary boom as permanent capacity would make it too loose.

6. Conclusion

Supply shocks are becoming more frequent, persistent and tied to structural change. Central banks must draw on computer science, political and climate science and energy economics, and work across disciplines, keeping their mandate in sight while adapting their analysis. Just as epidemiology entered policy debates during the pandemic, new fields are now part of the toolkit. He thanked the research network for taking these questions seriously from its launch and expected its partnerships between economists and other specialists to keep producing results as the future approaches faster than anticipated.

1. AI as a lever for productivity

Opening a conference with the European Investment Bank, Bank of Italy Governor Fabio Panetta said AI has already entered production, services, research and daily life, with new agent models and portable devices lowering costs and speeding adoption. Broad and timely diffusion could revive Italian productivity, especially in manufacturing, where it can prevent equipment failures, cut waste, optimise energy and materials, speed design and improve quality, and also in medicine through faster diagnosis and new treatments.

2. Managing the transition and financing it

Because the pace of change is high, the transition must be prepared: invest in skills, support the most exposed workers and avoid concentrating benefits in a few firms, sectors or regions, in the spirit of calls by Pope Leo XIV and President Mattarella that AI serve people and the dignity of work. The investments it needs are largely intangible, such as research, software, data, skills and organisation, which are risky and slow to pay, so long-term lenders, venture funding and broader capital markets are essential. Italy and Europe have savings, research and firms but too rarely bring them together at the scale required.

1. Honouring Mundell

Opening a Rome workshop held with CEPR and LUISS in memory of the Nobel laureate Robert Mundell, the Governor of the Bank of Italy recalled that Mundell's work covered optimal currency areas, the global monetary system and its geopolitics. His 1961 analysis saw low labour mobility as Europe's main obstacle to a shared currency, while others stressed the lack of common fiscal stabilisation.

2. A political project

In a 1969 plan, Mundell argued that Europe's money should rest above all on political reasons. Panetta agreed: monetary union grew from the post-war drive for reconciliation that produced the Coal and Steel Community in 1951, and three decades after Mundell's plan the euro was born.

3. Two waves of crises

The 2008 financial crisis and the 2010-11 debt crisis split the area into core and periphery, with uncoordinated budgets leaving monetary policy alone until Draghi's pledge restored calm. The pandemic and energy shock, though larger, met a joint response through Next Generation EU and national support.

4. What remains to be done

Europe should revive growth with reforms and joint investment in research, energy, digital networks and AI; build a true savings and investments union with simpler rules and a common safe bond; and digitalise payments, including a digital euro, to protect monetary sovereignty, a risk Mundell already linked to the dollar. Quoting Monnet's idea that Europe is built through crises, he argued that such slow, crisis-led progress no longer fits a fast-changing world: Europe must act before crises force it to, and the euro stands for unity, sovereignty and shared values.

1. A resilient year, then a new shock

In his concluding remarks on the Bank of Italy's annual report for 2025, the Governor noted that world output grew 3.4% in 2025, half a point above forecasts, despite wars and US tariffs. The United States grew over 2%, pushed by AI investment in data centres and by stock market gains that lifted consumption. China grew 5% by cutting export prices and finding new markets, a strategy that fails to address domestic deflation and invites protectionism. Easier monetary policy also helped. Markets showed signs of excess: high valuations, thin risk premiums, a search for yield in opaque segments, and rallies in gold, bitcoin and private credit, some of which reversed in 2025-26. The Gulf conflict then changed everything. Hormuz normally carries a fifth of global oil and LNG; its blockade lifted oil prices everywhere and gas prices in Europe and Asia but not in the United States. Fertiliser prices jumped, which will raise food prices early next year and could push tens of millions into extreme poverty. Inflation and short-term expectations are rising, and markets expect central banks to react, lifting rates at all maturities.

2. A fragile outlook

Energy costs cut household incomes and company margins, higher yields tighten financing and public debt limits support. Assuming a quick end to the conflict, the IMF expects world growth of 3.1% in 2026 and inflation of 4.4%; a longer war would be worse. Damage to energy infrastructure, high shipping and insurance costs and persistent uncertainty will weigh on spending. He stressed that today's risks are more numerous, more interconnected and harder to govern than before. Investors first fled to safety, lifting the dollar and pulling money from emerging markets; shares have since recovered, perhaps underestimating the damage, while rising long-term yields signal continuing tension. With heavy public debt and growing non-bank fragilities, small shocks can spread widely.

3. Trade and fragmentation

World trade grew 5% in 2025 as flows were rerouted and tariffs ended lower than announced; roughly half of the extra goods traffic was linked to AI equipment. Tariffs did not shrink the US goods deficit, as about 90% of their cost fell on American consumers and firms, while China's surpluses grew. The IMF warns that lasting barriers could slow trade growth below 3% in 2026. Governments rightly seek economic security, but indiscriminate fragmentation would raise costs, weaken supply chains and undermine cooperation, harming the citizens it aims to protect. The post-war rules-based system governed tensions for eighty years; its erosion through uneven rule enforcement, distorting industrial policies, imbalances and unequal gains must be addressed, and ties with countries that respect shared rules strengthened.

4. Global imbalances

Current account imbalances in 2025 reached their widest since the 2008 crisis. About two-thirds of all deficits are American, the result of large public deficits and low household saving; roughly a third of all surpluses are Chinese, since its model holds back consumption and favours exports; Europe's surplus reflects its difficulty in turning savings into innovative investment. America's net external debt equals about 90% of GDP. Large surpluses push global real rates down, encouraging risk-taking and borrowing, while deficit countries face sudden jumps in risk premiums. The energy shock may narrow imbalances temporarily but not their causes. A lasting fix requires a smaller US budget deficit, stronger Chinese consumption with less distorting industrial policy and more currency flexibility, and much more investment and a fully integrated single market in Europe; coordinated, the IMF estimates these steps would lift world GDP by 1%. Unmanaged imbalances tend to end in trade conflict, as before the 1985 Plaza Accord, or in financial crises, as before 2008.

5. Artificial intelligence and work

AI is spreading faster than earlier technologies. Five large US firms control about three-quarters of global computing power, most frontier models are American, China is catching up and Europe lags; yet the biggest gains usually go to those who adopt a technology, not those who invent it. AI is improving factory design, maintenance and logistics and speeding up drug discovery. For the first time it can perform highly cognitive tasks, but past innovations also created new occupations: six in ten US workers today do jobs that did not exist eighty years ago, and cheaper products can expand demand. The transition will hurt workers unable to switch and may widen inequality, so adoption by small firms, skills training and protection for exposed workers are essential. Work itself will change: in some jobs AI will assist people and free them for higher-value tasks, in others the human role will centre on interpreting results, exercising judgement and ensuring reliability, the parts automation cannot replace.

6. Europe: slower growth and the policy response

Euro area growth was 1.4% in 2025, about 1% excluding Ireland, held back in Germany and Italy by manufacturing hit by Chinese competition, while households kept saving. Inflation returned to 2%, allowing a 100 basis point cut in rates. Since March, confidence has dropped to 2022 levels, services weakened and banks tightened lending. ECB March projections showed growth of 0.9% in 2026 and inflation of 2.6% in the baseline, but a prolonged conflict could subtract a point of growth over two years and push inflation above 6%. Conditions are better than in 2021-22: rates are near neutral, demand is weaker, expectations are anchored and wages calm. Still, firms plan price rises and consumers expect more inflation, so the stance may need recalibrating to prevent a wage-price spiral; the June decision would depend on new projections, with no predetermined path. Acting in a timely and measured way, he said, protects household purchasing power, business confidence and the basis for durable growth, and the calibration would depend on how far energy costs filter into the wider basket and how strongly they depress spending and investment.

7. European policy gaps

Europe enters this unstable period with unresolved weaknesses that limit its growth and global weight. It faces dependence in defence, energy and technology and an incomplete single market in finance, energy and telecoms. Initiatives under the Competitiveness Compass, such as the Industrial Accelerator Act, a common European company form and the grids package, could help, but fewer than half of the planned proposals have been presented and under a quarter adopted. AI plans are delayed too, although the EU has rules, a strategy, investment programmes, rich industrial data and strong research; no call for tenders for AI gigafactories had been published by mid-May. Long negotiations, diluted compromises, uneven national application and unspent resources must be overcome, as credibility depends on delivery. Europe's savings flow abroad because capital markets remain national; beyond the savings and investments union, he called for a common European bond backed by shared fiscal capacity to provide a safe asset, fund common projects and strengthen the euro.

8. Italy: resilience but weak productivity

Since 2019 Italian GDP has risen over 6%, better than the euro area per person, driven by investment and exports, employment has risen strongly, and the country's net foreign position, deeply negative a decade ago, has turned positive at 15% of GDP, helped by prudent public finances. Growth slowed to 0.5% in 2025 as real wages lagged and Germany struggled, and the Gulf war may bring stagnation. Output per hour in the private sector has grown only 6% since 2000, against 13-34% in other large euro economies, while the working-age population is shrinking. Recovery plan spending exceeded €100 billion over 2021-25, about 30% of investment, adding nearly a point to annual growth and speeding up public tenders; private firms, which hold ample own funds, must now invest more in innovation and intangible assets.

9. AI adoption, skills and energy in Italy

About 30% of Italian firms use AI but only 5% intensively, below EU averages; adoption could add 0.2 to over 1 point a year to labour productivity, enough in the best case to offset demographic decline. He warned against repeating the 1990s, when slow adoption of information technology held back productivity for decades. Small firms face upfront costs, skill shortages, legal uncertainty and data protection concerns, and individual firms ignore the benefits that spread along supply chains, so he proposed stronger technology transfer, support for start-ups and venture capital, public procurement of innovation, AI in public administration and clear EU rules. Only 30% of people in their thirties hold a degree, 20% of young adults without a degree are out of both work and education, twice the rate elsewhere, more than 100 000 graduates emigrated in 2020-24 and education spending is a point of GDP below the EU average, a vicious circle of weak demand for skills and weak supply. Energy imports transfer wealth abroad; efficiency has improved, renewables reached 41% of electricity, grids are being expanded and new nuclear technologies deserve study, while support measures should stay temporary and targeted.

10. Banks and conclusion

Italian banks are profitable and well capitalised; smaller lenders are weaker, and recent problems at a few stemmed from poor governance, handled without contagion, and the exit of the weakest lenders has strengthened the sector. Large banks are spending on technology at levels comparable to European peers, while digital services attract younger customers; the Bank of Italy is attentive to less digitally skilled customers exposed to exclusion and scams. Mergers can help if competition, especially locally, is preserved, bringing Italy's banking structure closer to that of other large European countries and diversifying revenues; the five largest groups hold 68% of assets, less than in most peers. Lending has recovered but publicly guaranteed loans, over a fifth of business credit, should return to their targeted role, and equity finance must grow. IT incidents at banks rose 80% in 2023-25 and cyber incidents doubled; AI tools able to find system flaws quickly require stronger governance and DORA implementation. Recalling the 1946 choice of the Republic and of an open, rules-based world, he urged Europe to act together, Italy to invest in technology, skills and debt reduction, and governments to steer AI so that it serves people and gives young generations opportunities. Rules agreed at global level should protect competition, pluralism and the dignity of work, and success will be measured by the chances offered to young people to use their skills, be rewarded on merit and stay in the country.