How dangerous is Italy's banking crisis?

The Italian state is intervening to save the ailing bank Monte dei Paschi. The cabinet has approved the establishment of a 20-billion-euro fund via an emergency decree. Prior to that the bank’s own attempts to rescue itself with an injection of capital had failed. Commentators fear that the fund will not be sufficient to save the bank and asks why the EU has regulations about bank resolution at all if these are not applied.

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Il Sole 24 Ore (IT) /

Rome waited too long to intervene

Rome should have taken action much sooner, Il Sole 24 Ore concludes:

“The US, Germany, Spain, Ireland and the Netherlands - all these states intervened to supply their banks with capital. So we shouldn't be surprised that Italy has also decided to take this course. It's surprising that the bank wasn't nationalized much earlier, in 2011 at the latest. Instead they waited until the bank was in crisis and on top of that until the new EU regulations on bank bailouts had become effective. The economy would have benefited from earlier intervention, with decisive measures to reactivate loans to companies. This way the government could have prevented the entire national banking and finance system from being exposed to the dangers of contagion. … The return of the state to the world of credit is good news because this will help to resolve a crisis. … But in doing so the state must stringently adhere to the logic of the business world.”

NRC Handelsblad (NL) /

Italy is becoming a problem for the euro

The money earmarked to save the bank will not be enough, NRC Handelsblad predicts:

“Financial observers estimate that double the 20 billion will be necessary to do that. ... If the bank is saved in this way, Italian state debt, which is already the highest in the Eurozone, will rise even further. The volume of state debt is directly connected with the bank problem: both are the result of Italy’s long-term inability to reform its economy, its avoidance of tough decisions, opting instead for patching things up in the hope that the storm will pass. Thus it is not only the Italian banks that are a problem; Italy itself is gradually becoming a threat to the stability of the entire eurozone.”

Die Presse (AT) /

Bank failures still without consequences

What good are regulations when failure has no consequences? Die Presse asks: From Voltaire we have the famous saying that the English had an admiral executed from time to time 'pour encourager les autres' - to motivate the other admirals. In France, by contrast, incompetent officers were sent into retirement with princely pensions. Things are similar today in the world of high finance. The debate about whether the banks were too unregulated or whether the current regulations are wrong has long since been abandoned. All the regulations are ultimately worthless if failure or stupidity (or both together) fail to trigger any consequences. … Not even two years after the EU established new rules for the orderly resolution of failing banks they are already being broken - at the first opportunity. Once again we are 'too big to fail'. Or perhaps it should be: 'too big to jail'?