Quiet crisis: why battle to prop up Italy's banks is vital to EU stability

worldtraveller

Forget Brexit or Grexit, €360bn of bad loans within a fragmented Italian banking sector could be the biggest threat of all

Even a “small crisis” could trigger a chain of events that would threaten the stability of the European Union, the credit ratings agency Moody’s has said.

Brexit – if the UK votes to leave the 28-nation union – or even Grexit – the departure of Greece from the eurozone – are the obvious vulnerabilities.

But some commentators believe an altogether quieter crisis should also be at the top of the worry list: Italy’s battle to prop up its debt-laden banks.

The country that probably gave the English-speaking world the word for bank – medieval Italian merchants traded with each other on a bench known as banca – has a €360bn (£280bn) problem in its fragmented banking sector.

theguardian

Deja vu anyone?

CLAPTON

worldtraveller wrote: »

Forget Brexit or Grexit, €360bn of bad loans within a fragmented Italian banking sector could be the biggest threat of all

Even a “small crisis” could trigger a chain of events that would threaten the stability of the European Union, the credit ratings agency Moody’s has said.

Brexit – if the UK votes to leave the 28-nation union – or even Grexit – the departure of Greece from the eurozone – are the obvious vulnerabilities.

But some commentators believe an altogether quieter crisis should also be at the top of the worry list: Italy’s battle to prop up its debt-laden banks.

The country that probably gave the English-speaking world the word for bank – medieval Italian merchants traded with each other on a bench known as banca – has a €360bn (£280bn) problem in its fragmented banking sector.

theguardian

Deja vu anyone?

sorry this sort of discussion is not allowed until after the referendum :
it is clearly that case that there are no serious issues in the EU. (well except for those self inflicted by Greece)

mwpt

Debt issue, EU is tangental.

Thrugelmir

Debt is the issue that has been swept under the carpet. Hindering UK recovery. Along with unknown effects if the situation in China were to worsen unexpectedly.

michaels

mwpt wrote: »

Debt issue, EU is tangental.

But doesn't the fact that Italy uses the Euro make it an EU issue - ie the Italian govt almost certainly can't stand behind its banks if they were to fail given the current debt/GDP ratio and not having it's own currency it can't just print money to solve the problem?

Remember it was the solvency of the Greek banks that resulted in the latest bailout being required.

mwpt

michaels wrote: »

But doesn't the fact that Italy uses the Euro make it an EU issue - ie the Italian govt almost certainly can't stand behind its banks if they were to fail given the current debt/GDP ratio and not having it's own currency it can't just print money to solve the problem?

Remember it was the solvency of the Greek banks that resulted in the latest bailout being required.

Currency printing is default by another name. Greece had/has the option of defaulting but won't do it because it'll mean they have to borrow from capital markets instead of ECB and they'd have to face up to the fact that in reality they are practically a third world economy living a first world lifestyle.

Italian banks won't default because Italian government probably won't let them, probably for fairly similar reasons.

Debt. Debt. Debt. MOAR DEBT. But high house prices are good for us innit.

Crashy_Time

mwpt wrote: »

Currency printing is default by another name. Greece had/has the option of defaulting but won't do it because it'll mean they have to borrow from capital markets instead of ECB and they'd have to face up to the fact that in reality they are practically a third world economy living a first world lifestyle.

Italian banks won't default because Italian government probably won't let them, probably for fairly similar reasons.

Debt. Debt. Debt. MOAR DEBT. But high house prices are good for us innit.

Obviously someone with a bubble priced mortgage at emergency rates would want the extend and pretend to continue, because rates rising will probably be a consequence of any EZ break down, but that doesn`t mean it will be able to continue indefinitely, at some point someone is going to default, Brexit would speed things along nicely probably.

CLAPTON

mwpt wrote: »

Currency printing is default by another name.

no, this is incorrect except in the sense that every country in the world has defaulted

mwpt

CLAPTON wrote: »

no, this is incorrect except in the sense that every country in the world has defaulted

When trade has rubber duck shoulder is also negligent recently. It shows all in sense because post does not.

CLAPTON

mwpt wrote: »

When trade has rubber duck shoulder is also negligent recently. It shows all in sense because post does not.

printing money isn't the same as a default

Crashy_Time

CLAPTON wrote: »

printing money isn't the same as a default

More a "devaluation"?