One is really sick of pointing to banking woes and upcoming crisis but they keep coming.
Italy is hardly a new player and its fiscal/banking woes have been talked for a while. The concerns have increased recently following Brexit. Infact, all this is happening in a country which apparently gave birth to idea of banking in Europe. Bankers from Italy migrated elsewhere to shape banking in other parts of Europe. And now they have just forgotten their own history lessons.
Caroline Gray of Focus Economics has an update on Italian banking:
The sudden panic about a potentially imminent Italian banking sector collapse back in July has somewhat subsided for now, but sooner or later the issue will inevitably rear its ugly head again. Two months after Italian bank stocks collapsed even further in the aftermath of the Brexit vote, fears of an imminent need for a bail-in have receded as the Italian government works on plans to shore up its weakest bank, Monte dei Paschi di Siena (MPS). This will be achieved via an alternative but rather ambitious method culminating—if all goes according to plan—in a new capital injection. However, MPS, which came up short in July’s ECB stress tests, has already received capital injections in the past. Such plans to patch up banks have tended to involve kicking the can down the road rather than providing a more definitive solution to the 360 EUR billion of non-performing loans (NPLs) weighing down Italy’s banking sector, equivalent to one fifth of its GDP. If a sustainable solution is not found to clean up Italian bank balance sheets in the near future, they will inevitably constrain domestic demand and thereby weigh on the country’s already feeble growth even further.
Just going on and on…