MILAN, Italy (International Herald Tribune)-- The head of Italy’s central bank said Saturday it was too early to say that the financial crisis hitting the world’s most advanced economies was over — or even to assess its full impact on the world economy.

Mario Draghi, who heads the Financial Stability Forum panel of regulators from around the world charged with monitoring market crises, said that although market tensions were easing, normal conditions have not yet been restored.
“The financial turmoil that swept over the major advanced economies brought to an end a long period of growth, low inflation and plentiful credit,” Draghi said in his annual keynote address on the state of Italian banking and other economic considerations.
“It is too early to say that it has passed. ... And it is too early to assess fully the impact on the real economy.”
He said that will depend on how quickly leading financial institutions are able to recapitalize.
Turning to financial markets, Draghi said the financial system that emerges from the current crisis must have different rules, less debt and more capital.
Draghi said the major threats to the world economy were inflationary pressures due to rising energy and food prices along the U.S. economic slowdown.
Draghi, who is a board member of the European Central Bank and helps set its monetary policy, said that the impact of the world financial crisis on banks in the euro zone has been “only marginal,” noting that their balance sheets were “soundly based on fundraising from customers.”
Draghi also said the ECB had successfully managed to keep inflation under control, with higher consumer prices not translating into higher wages for now.
“The firm anchoring of inflation expectations has allowed the European Central Bank to keep interest rates unchanged for quite some time, thus helping to support the economy,” Draghi said.
Draghi said that the Italian economy will remain weak for all of 2008. Italy’s economy grew by 0.4 percent in the first quarter, preliminary data showed. While it has averted a technical recession, growth is widely expected to slow in the second quarter of this year.
“The cyclical weakness of Italy’s economy will remain throughout the current year, at the least,” he said.
Draghi also commented on Prime Minister Silvio Berlusconi’s plans to give regions more power over how they spend their tax revenue, saying the plan will win support based on how well it improves the efficiency of public institutions.