The Next Italian Bank Threatens to Topple

Sharp Dose of Deja Vu for Italy’s Teetering Banks.

In a speech that did little to soothe investors’ nerves, Italy’s finance minister said yesterday that he was “strangely optimistic” about Italy’s economic outlook. Senior eurocrats in Brussels are far from convinced. “Italy’s accounts are not improving,” blasted European Commission Vice-President Jyrki Katainen at a press conference yesterday.

The financial situation in Italy, according to Katainen, is due to get worse with Italy’s deficit in 2018 now predicted to be €3.5 billion more than previously stated by Paolo Gentiloni’s administration in the spring. “The only thing I can say in my name is that all Italians should know what the real economic situation in Italy is,” he said.

That real economic situation includes the fragile health of the nation’s banking system which continues to teeter on the edge despite the controversial rescue last summer of Monte dei Paschi di Siena (MPS) and the resolution of the Popolare di Vicenza and Veneto Banca, which left over 40,000 businesses in Italy’s wealthy Veneto region starved of credit.

It’s pretty clear that investor concerns about the health of Italy’s toxic debt-laden banking system have not been put to rest. Today’s developments will hardly have helped steady nerves after mid-sized lender Carige, with assets of €26 billion, scuttled a capital increase demanded by European authorities when it failed to get the backing of a banking consortium led by Credit Suisse, Deutsche Bank, and Barclays to underwrite the deal

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