The Impossible Italian Job

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, involving the participation of Wall Street’s biggest entity, JP Morgan Chase. But investors are still not convinced: since the announcement of the latest intervention, MPS’s penny stock has slipped a further 8% to €0.23.

If investors sense that not even JP Morgan Chase, with the help of an all-star cast of global systemically important, precariously interconnected financial institutions, can sanitize a fraction of the bad debt putrefying on the balance sheets of the country’s third biggest bank, then Italy — and by extension, the Eurozone — may have even bigger problems than previously thought…

Continue reading the article at WOLF STREET 

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