Renzi, as previously her ex-colleague David Cameron, committed the error of linking the outcome of the referendum on his proposal of political reform, with its presence in the power, in a stage in which the european peoples turn to positions increasingly critical to the European Union (EU) and politicians from the traditional parties.
Aware of the gravity of the wager made by Renzi, a wide arc that extended from the dome of the EU and the European Central Bank (ECB) to the big industry and the bank of Italy supported the prime minister in the referendum as the only guarantee to ensure the political stability in the peninsula.
The support acquires even more sense when you take into account that the risky move of Renzi against the backdrop of an economy whose public debt represents 130% of GDP, the highest of the developed economies and the second highest after that of Greece.
And, above all, a situation of potential bankruptcy of the banking system, whose bad loans are around to 360,000 million euros, something like 20% of the credit portfolio total.
in Addition, Italy has the unfortunate record of a stagnant economy during the past two decades, as well as a youth unemployment the highest in Europe along with Spain and Greece, an unemployment rate overall of 11%.
So, if Renzi wanted to win to strengthen the power of the Executive and put in place important measures of economic and financial to try to get to Italy from paralysis, his defeat has sharpened the weaknesses of the Italian economy and, in particular, the problems posed by a rescue of its banking system.
the case of The Monte dei Paschi, the oldest bank on the planet, it symbolizes perfectly the difficulties of Italian banks and its situation on the edge of the abyss.
Rescued by the State in two opportunities, in 2014 and 2015, at a cost of 8,000 million euros, the bank failed, however, to overcome its crisis and this year its market capitalization collapsed by 85% after having failed in the stress testing of european financial institutions.
After the ECB demanded of the Monte dei Paschi increase its capital by the end of this year, its authorities began to develop a plan in which you were involved J. P. Morgan and Mediobanca, hoping to achieve an injection of 5,000 million euros in its capital by appealing to an investor of great depth, such as the sovereign wealth fund of Qatar.
The fall of Renzi, who resigned his position last Wednesday, has frozen this plan, as no investor wants to risk in a context of political vacuum, where the alternatives range from the formation of an interim government, technocratic complete the mandate of Renzi until 2018 (option preferred by the EU, banking, and entrepreneurship) or a call to elections for which it is necessary to reform the current law.
Everything indicates that the Monte dei Paschi will not be able to close any agreement for the conduct of its recapitalisation and, from this point of view, everything suggests that the State should intervene to save the bank from bankruptcy, which, necessarily, would a crisis in the entire domestic financial system, with negative repercussions in the Eurozone.
it Is for this reason that the Italian bank has requested that the ECB will agree to a longer term-expected to take until the end of the rescue of the entity, which means five more weeks, according to sources from the banking sector of Italy.
Both in Brussels, headquarters of the European Commission, as well as in Frankfurt, the financial center germany is home to the ECB, there is ample provision to grant that term to the Monte dei Paschi, as there is consciousness of a worsening and that the bank would only serve to further weaken the EU and the Eurozone.
A state bailout of Italian bank would require, in accordance with the laws passed by the European Parliament, to download the cost of the crisis on the holders of bonds of the entity and its depositors, who would be converted, by force, their savings and their assets in the highly depreciated shares of the Monte dei Paschi.
As pointed out with great accuracy by the latest edition of the weekly british Economist, “no matter what happens in politics in the coming months, Italy should, above all, to avert a financial crisis that spread so disastrous in the Eurozone”.
But the crisis of the Monte dei Paschi is just the tip of the iceberg of the complex web of difficulties in the Italian banking system.
The country’s largest bank, UniCredit, broke this week of their participation in a bench Polish while still trying to sell their branch of wealth management to a French company and program a new issuance of shares to capitalize in 2017.
Likewise, the pressure of the market for mergers have led to the integration last October Banco Popolare and Banca Popolare di Milano, while the other two entities of importance, the Popolare di Vicenza and Veneto Banca, study to create a single bank unified.
In this context of precariousness, policy, and extended financial crisis, the economic powers and institutions in Italy and in the EU looking for a quick solution to the power vacuum created by the defeat of Renzi and his subsequent resignation, to avoid a long parliamentary process of reform of the electoral law to convene general elections.
The last thing you want to the establishment of Italian and european is a long and uncertain process of political discussions, which would prevent a quick resolution of the banking crisis, even if temporarily, would risk potential bankruptcy of entities whose depth and extension would be, without a doubt, very dangerous to the sagging Eurozone.
No comments:
Post a Comment