Intesa Sanpaolo SpA Chief Executive Officer Corrado Passera said the euro area faces a risk of sovereign default and European leaders need to strengthen fiscal policies to help stabilize financial markets.
“The risk is there,” Passera said in a Bloomberg Television interview today at the World Economic Forum meeting in Davos, Switzerland, when asked if he was concerned about a possible default in Europe. “I believe it is within our reach, the possibility to avoid those defaults. If they happen we can manage them, but we should really avoid them.”
The European Union and the International Monetary Fund last year approved rescue packages for Ireland and Greece after concerns about mounting budget deficits pushed up bond yields and eroded confidence in the single currency. Passera, CEO of Italy’s second-biggest bank, said the threat of sovereign defaults came from the “mismanagement” of public finances and the use of taxpayers’ money to support private debt.
Passera said the impact on Italian banks from any potential default would be “very, very low because we are very limitedly exposed to those countries.” However, “for a number of other countries, the big ones, default from the peripheral countries might mean very big losses,” he said.
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