(Bloomberg) — The European Union would benefit from common debt issuance to protect from asymmetric shocks and complement monetary policy, said European Central Bank Governing Council member Ignazio Visco.

“A common budget, accompanied by the revision of national public finance rules, should be founded on the possibility of having common debt issuance, guaranteed by autonomous inflows,” the Bank of Italy governor said during his annual speech in Rome.

This would contribute to a capital markets union, increase the efficiency of monetary policy and allow the euro to become a truly international currency, Visco said.

The coronavirus pandemic forced the ECB to unveil an unprecedented emergency bond-buying program to keep borrowing costs low and avoid excessive disparities between stronger and weaker euro-zone members. The EU has also created a Recovery Fund worth more than 800 billion euros ($975 billion) to help support its rebound from the crisis.

Italy, with mammoth debt expected to reach almost 160% of output this year, has particularly benefited from ECB bond buying keeping its yields low. The country will also be the Recovery Fund’s main beneficiary with over 200 billion euros in EU and domestic cash coming its way in the next few years.

“While they don’t solve the problem of an incomplete economic and monetary union, the more they are used effectively, the more the programs undertaken in the past year can constitute a point of reference to design mechanisms of a more permanent and agile nature,” Visco said.

Great Responsibility

The governor added that Italy has a great responsibility to use the money it will be given wisely, to solve its problems and to allow the success of the program to underline the importance of a united EU.

Visco specified that countries’ old debts would be kept separate and “remain the responsibility of single countries.”

The governor confirmed that Italy’s economic growth is expected to exceed 4% this year after declining almost 9% in 2020. Continued expansion will help put debt on a descending path, he said.

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While Italian lenders have weathered the pandemic well, non-performing loans increased in the fourth quarter and their growth may further accelerate in coming months, Visco said.

He added that the extension of a moratorium on repayments may reduce transparency of balance sheets, and he urged banks to adopt prudent policies and be proactive in reclassifying loans under suspension so as to avoid surprises for investors.

(Updates with non-performing loans starting in 10th paragraph)

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