In the midst of the financial crisis, the rescue packages to the banks sowed panic in the economies of Europe. The lack of a common way to sort the process, and the excessive weight on the bank’s customers for the benefit of its shareholders, increased the controversy.
The reforms implemented by the governments of the European Union to cope with these episodes will be put to the test very soon, as the capital increase in Monte dei Paschi, the third largest bank of Italy, stands on the verge of failing, and the government bailout appears imminent.
If the authority is lucky, the US$ 21 billion of extra borrowing approved by parliament to buy the nonperforming loans of the bank, will be sufficient to contain the crisis. If not, they will be short of more than US$ 50 billion in toxic assets on the balance sheets of Italian banks.
If the new government that took over after the resignation of prime minister Matteo Renzi at the beginning of the month, fails to isolate the situation of Monte dei Paschi and the contagion spreads to the rest of the industry, analysts have warned that the uncertainty could return to hit to banks across the region.
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