Banca d'Italia's Angelini highlights soft power for central bank cooperation

Banca d'Italia Deputy Governor Paolo Angelini opened the 7th Soft Power Conference by defining soft power as the ability to shape preferences through attraction and persuasion, rather than coercion.

He noted that this concept is increasingly vital amid rising geopolitical tensions, global trade fragmentation, and protectionism, which challenge international cooperation.

Angelini underscored that soft power, rooted in dialogue, is more necessary than ever, despite polarization.

He highlighted findings from the Global Soft Power Index, suggesting economic benefits beyond diplomatic prestige.

For central banks, trust, credibility, predictability, and effective communication are crucial forms of soft power.

These attributes influence decisions by households, firms, and financial investors, thereby shaping expectations and the economy's functioning.

Angelini highlighted the importance of international cooperation within the central banking community, where technical dialogue persists through fora like the International Monetary Fund (IMF), World Bank, Basel Committee on Banking Supervision (BCBS), Bank for International Settlements (BIS), and Financial Stability Board (FSB).

These platforms facilitate agreement through compromise, even on contentious issues.

He noted gradual progress on climate-related risks, specifically agreeing on a focus for physical risk in financial stability and supervision.

While not optimal for all, this pragmatic outcome allows the community to advance and maintain open dialogue, which Angelini described as an investment in soft power – the force that sustains cooperation despite diverging interests.