Italy Hit by Banking Crisis

• Italy Hit by Banking Crisis
  by Marianne Arens, http://www.wsws.org/  
  Sharp turbulence on the Milan stock exchange in January focused attention on Italy’s deep economic and financial crisis. At the same time, the conflict between the Italian government and the European Union (EU) Commission has intensified. Prime Minister Matteo Renzi (Democratic Party–PD) has responded with new, stepped-up attacks on the working class.
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  Stock markets across the world experienced a sharp downturn at the beginning of 2016, with the stock exchange in Milan affected particularly severely. Although all European economies suffered as a result of the slowdown of growth in China and the decline of oil prices, “apart from Athens, the Milan stock exchange was … by far the worst affected,” as the Swiss Neue Zürcher Zeitung wrote on January 21.
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  In mid-January, the stocks of many major banks and corporations fell steeply. The worst losses were to the stocks of Fiat, UniCredit bank, Monte dei Paschi di Siena bank, and Cariger bank.
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  The value of Monte dei Paschi di Siena (MPS) bank, the oldest bank in the world (founded 1472), fell temporarily by half, and its share price dropped to just 50 cents. The bank had to be removed from trading. On January 24, the government decided to protect the bank from bankruptcy with a guarantee from the Economics and Finance ministry.
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  The MPS is one of six Italian banks that reportedly hold large quantities of toxic assets. With net wealth of €10 billion, the value of bad loans allegedly totals €24 billion. As the European Central Bank confirmed in a data analysis at the end of last year, there are more than €200 billion worth of toxic assets on the books of Italian banks.
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  The figures reflect the weakness of the Italian economy after five years of recession. Seventeen percent of loans held by Italian banks today are, according to EU figures, in danger of turning bad. By contrast, according to figures from the Royal Bank of Scotland, in Germany the figure is 2 percent and in France 7 percent.
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  The following comparison brings out the state of crisis in the Italian economy: while six years ago small and medium-sized businesses had the possibility of paying back 90 percent of their loans, today it is only 72 percent.
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  Already in November 2015, four smaller banks fell into crisis: Banca Popolare dell’Etruria in Arezzo, Banca Marche in Ancona and two local savings banks in Chieti and Ferrara. The Italian government did not step in to support the crisis-ridden institutions with state loans, because the EU has since banned state help for failed banks.
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