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The banking system and business financing: new challenges

  • Rome
  • 18 April 2023

        Business financing today is facing some daunting challenges. Italian firms are having to confront a particularly uncertain scenario marked by a deep credit crunch and an exponential increase in the cost of raw materials. Nevertheless, the picture that emerges from their reaction to these difficulties, with exports on the rise and inflation fears being allowed to subside, is one in which the numerous potential opportunities are inevitably accompanied by risk.  

        At the same time, the banks are experiencing a certain pressure regarding profitability, but have over the years promoted a notable process of wealth strengthening that has provided reassurance in the face of uncertainly, not least as regards liquidity. Credit institutions can play a supporting role to business, both in the management of momentary difficulties through measures aimed at rendering debt sustainable, as well as over the longer term by encouraging financing diversification and greater recourse to the capital market.

        Such measures are even more critical for the country’s vast fabric of small and medium-sized enterprises in need of capital for growth and more exposed to the financial and industrial effects of the ecological transition. For Italy alone, the resources required to achieve the decarbonization targets set by European programs such as Fit for 55 and Repower EU amount to 1.1 billion euro – less than 5% of which is covered by the National Resilience and Recovery Plan (PNRR).

        Essential therefore is a strategy capable of involving financial institutions with public actors in order to free up resources – through tax reform – and mobilize private savings on behalf of an ambitious plan for transformation. The country must muster all its resources to offset the narrow margin for fiscal maneuvering, precisely while other economic areas – starting with the United States – are unveiling major stimulus plans.

        This mobilization of energies must also take place on the cognitive and cultural plane; the economic changes now underway follow close on the heels of the technological revolution and, in particular, the advent of artificial intelligence. The delays that Italy, and Europe in general, have accumulated in this regard risk creating a productivity gap that will be difficult to close. Both vision and strategies will be pivotal in order to prevent the country from failing to meet the two-fold challenge of the digital and ecological transitions. Italy must instead become a driver of development that will benefit future generations.

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