The Impossible Italian Job. The Italian Banking Crisis Would Complete Europe’s “Doom Loop”
- The Impossible Italian Job. The Italian Banking Crisis Would Complete Europe’s “Doom Loop”
by Don Quijones, Spain & Mexico, editor at WOLF STREET
Italy’s repeated attempts to stave off a full-blown financial crisis and breathe life back into its moribund banking sector can be summed up in four words: too little, too late.
In April, it set up a bad bank vehicle called Atlante that was expected to bail out the country’s most troubled lenders as well as allay growing fears of a systemic crisis within the financial sector. With just €5 billion of funds to its name, it did neither.
Cue Plan B, which saw the EU in June grant permission for Italy to use “government guarantees” to create a “precautionary liquidity support program for their banks“ worth €150 billion. On the surface it seemed like a lot more money, but in the end it amounted to little more than a PR stunt. The stampede out of Italian banks barely missed a beat [As Fears of “Bank Run” Escalate, Italian Banks Get €150 Billion Bailout of Empty Promises].
Finally, at the end of July things got seriously serious with the unveiling of Plan C: a third, much larger rescue deal for Italy’s chronically dependent and third largest bank, Monte dei Paschi. The deal involves a consortium of banks, led by JP Morgan, and in a secondary role, Italian investment bank Mediobanca, which will apparently help Monte dei Paschi raise €5 billion in new capital and sell €9.2 billion in bad loans at a deep discount to get them off its books.
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