07-18-2016, 11:33 PM
The Italian government, which failed to gain European Union backing for a bad bank just months ago, is sounding out regulators on ways to shore up its banks after their shares were hammered following the U.K.’s vote to secede from the bloc. Valdis Dombrovskis, a vice president of the European Commission, said on Tuesday that the EU’s executive arm is “closely monitoring the situation with the banking sector in Italy” and is “in close touch with the Italian authorities as regards possible steps.” Various options are under discussion, “so I cannot comment in more detail right now,” he said in an interview in Brussels.
Italy Explores Bank-Rescue Options With EU on Brexit Losses - Bloomberg
The city has roughly €13.6 billion ($15.2 billion) in debt and more than 12,000 creditors—though the pile is so complex no one really knows how much is owed to whom. Rome faces outstanding bills for operating its 61-year-old metro system, hauling trash, and running a network of unprofitable pharmacies that compete with private shops. The courts are grappling with hundreds of lawsuits over unpaid debts going back 50 years for land expropriated to build hospitals, streets, and other city projects—including some debts connected to the 1960 games, former Mayor Ignazio Marino has said.
Populist Politicians Take On Italy’s Massive Debt Pile - Bloomberg
However, Brussels is refusing to budge, and senior banking sources believe Renzi could press ahead with a €40bn bailout. Such a move would be the equivalent of throwing a hand grenade at the entire EU project. By flouting state aid rules, it throws into question the future of the banking union, a central pillar of the eurozone. Also, by setting a precedent for bank bailouts, it paves the way for countries such as Portugal, where the financial system is also under strain, to suddenly do the same, therefore undermining the EU’s entire credibility. Forget the Greek crisis – this is Europe’s biggest test yet.