Italy pays: Is the banking union redundant?
The government in Rome is rescuing two regional banks at a cost of 17 billion euros. The EU Commission gave the green light for the move because creditors will cover some of the costs. The fact that billions of euros in taxpayers' money will nonetheless go into saving the banks prompts commentators to question whether the EU's banking union works at all.
Once again it's taxpayers who fork out
Italy's bailout makes the EU banking union a farce, Der Standard concludes:
“These rescue actions leave a bitter aftertaste because the EU told its citizens long ago that no more public money would flow into failing banks. The safety net seemed to be in place: first shareholders and creditors were to help out and write off interest and outstanding debts. ... If that wasn't enough then the resolution fund, which is financed by the banks, would be the second resort. Again and again nation states, the EU Commission and the watchdogs have found arguments to justify why the new set of rules shouldn't apply in the case at hand. The only honest thing to do in this situation would be to scrap the whole system.”
Brussels needs to revise the rules
It's absurd to criticise Italy for saving the banks, economist Francesco Giavazzi explains in Corriere della Sera:
“In just six months the government has managed to dispel the dark cloud that hung over Italy for years. … The EU regulations were of little help in doing this, from which we can conclude that they must be at least partially revised. … If we add to yesterday's cash injection from the state (to the tune of five billion) the five billion that are needed to save Monte dei Paschi, we're talking about paltry sums compared with the 140 billion euros that Berlin has spent on stabilising its banks. (But more intelligently than us, Berlin intervened when the EU regulations still permitted bailouts using tax money so no one made a fuss).”
Bailout comes too late
Italy's governments are to blame for the fact that Rome had no choice but to save the banks, La Repubblica comments:
“Both the current and the previous government refused to acknowledge the scale of the banking crisis. At the start of the crisis in 2016, four billion euros were gathered from banks, bank foundations and insurance companies via the Atlante bank bailout fund. With this money the bad debts were to be bought up, but instead it was pumped into the two banks as fresh capital, in vain. It would have taken a lot more, including state funds, but they would have had to openly challenge Brussels to do that. … The referendum on the constitution was also pending and that wouldn't have been good advertising for the government. … Now Rome has no choice but to pick up the pieces and try to put them together again.”
Banking union needs better rules
The Rome government's bailout goes against the rules of the banking union, De Tijd complains:
“With this move the Italian government is trying to prevent a financial and political crisis. But it will have to use a lot of public funds. Now that the rules of the European banking union must be tested in practice that's clearly not so simple. The script that Europe has developed for the resolution of problem banks is not applicable everywhere. … Because the Italian state will have to reach deep into its pockets once more. We must wait and see how the financial markets react and what the impact will be on Italian bond yields. But what is happening now makes it clear that the agreements regarding the European banking union and the resolution of problem banks will have to be substantially revised.”