Italy Watch...

[UndercoverElephant]

http://news.xinhuanet.com/english/busin ... 647902.htm

News Analysis: Italy may be next to request EU bailout

ROME, June 12 (Xinhua) -- Italy, the eurozone's third largest economy, could possibly seek a bailout from the European Union (EU) following Spain's rescue appeal on June 9.

The Italian financial newspaper Il Sole 24 Ore believes the agreement reached by eurozone finance ministers to shore up Spain's teetering banks represents "the removal of a filter" that separated Spain and Italy from the group of heavily indebted EU countries.

Translation: "if Spain gets a no-strings-attached bailout, so do we."

[raspberry-blower]

More than about time to resuscitate this thread in light of the on-going crisis that is playing out there.

Wolf Street: Fears of a bank run escalate, Italian banks get bailout

The Commission has also stipulated that only “solvent” banks are eligible for the “precautionary” scheme, as if Italy, where banking stocks have fallen by a mind-blowing 54% in just the last six months into penny-stock territory, is just brimming with banks that are perfectly solvent but would nonetheless appreciate the kind offer of new funds they can’t use.

The scheme is clearly a desperate ruse, but if it can temporarily convince enough voters, investors, and bank depositors that things are not quite so bad in Italy anymore, that the banks finally have something of substance — and not just unusable, inaccessible funds — backstopping their €360 billion worth of non-performing loans, it will have served its purpose.

Italian banks are in poor shape and are one of the major sources of concern.
There is also a referendum due there in October - things could quite decidedly interesting

[raspberry-blower]

Yves Smith: Political and financial contagion from the Italian banking crisis: Italy's exit?

The danger of a bail-in is it is a one-size-fits-all approach guaranteed to cause bank runs. A “bail in” means that rather than using new money to restore bank equity, shareholders are wiped out then junior creditors if needed, and enough of the remaining creditors are forcibly turned into shareholder. As Fazi points out, it’s a potentially useful tool but a terrible idea as a forced solution. For instance, the first time bail-ins were used was in Cyprus. Those banks had little in the way of borrowed money, so it was depositors who took haircuts. In the case of Spanish banks, many depositors had been persuaded to invest in equity-like instruments that they were falsely told were the same as deposits. That puts them near the head of the line for taking losses in the event of recapitalization. In Italy, some banks have apparently resorted to similar chicanery, but not on the scale that took place in Spain. However, many consumers are investors in bank bonds, so they would be hit in the event of a bail in. And given the Cyprus precedent, a bail-in of any size should scare depositors, and will lead them to move deposits from weak banks to stronger ones, creating liquidity stress and even bank runs.

It’s not as if Italian officials are ignoring this risk; they’ve proposed implementing a good bank/bad bank structure, and sought emergency relief so they can exceed Maastrict deficit limits to assist their banks. They were told in effect that their problem was not an emergency and they need to follow the unworkable bail-in regime. Renzi was rebuffed by Merkel when Italy tried again in the wake of the Brexit vote, arguing that the situation had become more dire. Merkel insisted that Italy needed to follow the new rules.

The EU has sown the seeds for its own destruction - now it is doing its utmost to ensure this happens in reality

[johnhemming2]

So if a bank has lost a load of money and needs more capital where does that come from

a) The taxpayer
b) Those people who have lent money to the bank whose loans or quasi loans are turned into equity.
c) The Tooth Fairy

If you do not think it should come from any of those. Who should it come from?

[Little John]

It should come from nowhere. If a bank fails, then its domestic depositors should be bailed out by deposit protection funded by the taxpayer. But only up to a certain limit, The money may then be deposited into an account of their nomination. Any money over and above a deposit protection account limit and any money knowingly invested in risky assets with the bank should be left to fail along with the bank.

But then, the above is only a second order issue. The first order issue is that the management of our money should not be in the hands of private financial bodies. We, the people have to wrest democratic control back.

[johnhemming2]

The FSCS is what guarantees deposits in the UK

https://en.wikipedia.org/wiki/Financial ... ion_Scheme

It is primarily funded by the banks not the taxpayer.

We obviously disagree about whether only the state can lend money or not. There is no sense wasting time on that disagreement.

[raspberry-blower]

For the hard of comprehending, this thread is specifically about ITALY John.

Therefore posting about what protects UK savers is totally irrelevant to this thread because the UK is outside the Eurozone and is not subject to ECB rules and regulations. So please keep this thread to financial events happening in Italy.

Italy is in the Eurozone - there is a major conflict brewing between the ECB and Italy with its woefully under-capitalised banks. Italy wants to spin the good bank/bad bank scenario whereas the ECB want the bail-in approach.
What makes this all the more interesting is that the head of the ECB is Mario Draghi - who is Italian!

[johnhemming2]

A comparison of what happens in the UK is not irrelevant to the thread.

[raspberry-blower]

A comparison of what happens in the UK is not irrelevant to the thread.

Actually John there are other threads that your previous posts would have been better suited to.

Please keep this to events unfolding in Italy first and foremost

[raspberry-blower]

If anyone wishes to continue discussing the implications of an Italian banking collapse - or indeed emanating from anywhere else in Europe - I've started this thread

Meanwhile, back to Italian politics

Bloomberg: Populist politicians tackle Italy's massive debt pile

Before Raggi, a government-appointed commissioner ran Rome for nine months. Marino, from Renzi’s Democratic Party, had been forced out over a scandal that included allegedly billing the city for a dinner with the Vietnamese ambassador that never took place. His downfall and Renzi’s inability to counter Raggi with a convincing candidate portend growing problems for the ruling party. A poll released in July by researcher Demos found that Five Star would win a majority in Parliament if elections were held today. Renzi’s popularity will be tested in October, with a referendum he proposed on reducing the Senate’s powers and streamlining the legislative process. If it fails, he’s said he’ll quit, leading to “months of political instability,” says Giovanni Orsina, a government professor at Rome’s Luiss-Guido Carli University. “That would make Italy a problem for Europe once again.”

the autumn referendum could well see the downfall of Prime Minister Renzi. The question is whether the 5 Star Movement can maintain or even increase its current level of popularity.
Painting Beppe Grillo and his cohorts as populists is misleading though.
Unlike Farage or Johnson they do have a plan to see them exit the EU already in place. Whether it is workable is another matter

[raspberry-blower]

Beppe Grillo interview: Political amateurs re conquering the world

euronews
“There is a gap between giving populist speeches and governing a nation.”
Beppe Grillo
“We want to govern, but we don’t want to simply change the power by replacing it with our own. We want a change within civilisation, a change of world vision.

“We’re talking about dematerialised industry, an end to working for money, the start of working for other payment, a universal citizens revenue. If our society is founded on work, what will happen if work disappears? What will we do with millions of people in flux? We have to organise and manage all that.”

[emordnilap]

Beppe Grillo interview: Political amateurs re conquering the world

euronews
“There is a gap between giving populist speeches and governing a nation.”
Beppe Grillo
“We want to govern, but we don’t want to simply change the power by replacing it with our own. We want a change within civilisation, a change of world vision.

“We’re talking about dematerialised industry, an end to working for money, the start of working for other payment, a universal citizens revenue. If our society is founded on work, what will happen if work disappears? What will we do with millions of people in flux? We have to organise and manage all that.”

That is one interesting interviewee.

[raspberry-blower]

Looks like Beppe Grillo's 5 Star Movement could soon have the chance to be in a governing coalition.

Results so far show that Renzi lost the referendum - currently 60% No to 40% Yes. Renzi has quit.

The 5 Star Movement have said they would take Italy out of the Euro - this would be the beginning of the end for the wretched Euro

[fuzzy]

We will probably still be stung for the bill as usual.

[Lord Beria3]

http://www.telegraph.co.uk/business/201 ... re-secure/

Ambrose latest on the Italian banking crisis. Cracking stuff.