Energy shocks and AI boom split global growth, Panetta warns
Banca d'Italia Governor Fabio Panetta warned that global markets may be underestimating risks from Middle East conflict energy shocks and persistent inflation. Speaking at the Italian Banking Association annual meeting in Rome, he called for stronger risk capital markets to support innovation.
Energy shocks versus the artificial intelligence boom
The global economy faces opposing forces from Middle East energy price shocks and rapid growth in artificial intelligence.
In the euro area, elevated energy costs weigh on activity while inflation hovers near 3 percent, expected to remain above target until early 2027.
The European Central Bank responded in June with a 25 basis point interest rate increase to address upside risks.
Despite geopolitical tensions, Italian banks demonstrate resilience.
Bank lending to non-financial firms accelerated to 6.2 percent on an annualized quarterly basis in May, up from 2.3 percent in February.
Furthermore, net non-performing loans have dropped to 1 percent of total loans from over 8 percent a decade ago.
Financing the digital shift beyond traditional banking
Firms increasingly invest in intangible assets such as patents and software, which are ill-suited for traditional bank debt collateral.
Globally, private equity and venture capital assets tripled to $10 trillion between 2014 and 2025.
In Italy, risk capital remains underdeveloped, with private equity accounting for just 0.5 percent of insurance company assets and 0.7 percent of pension fund investments.
Overcoming this shortfall requires deeper domestic funds of funds and European capital market integration.
A necessary vision hindered by structural inertia
Panetta rightly highlights the gap between bank lending and the equity needs of an intangible economy.
Yet exhorting domestic pension funds to invest in venture capital will achieve little without structural tax reform.
Until Europe completes capital market integration, innovative firms will keep fleeing abroad for financing.