Avoiding the Next Banking Crisis: An Agreement Almost “In Hand” – July 12

Palazzo_Finanze

The main headline of today’s Italian newspapers concerns the Italian government’s discussions with EU finance ministers on measures the Italian government would like to take to prevent a banking crisis. Prime Minister Matteo Renzi stated in an interview with Corriere della Sera that an agreement is almost “in hand”. Meetings have been taking place between Finance Ministers of European countries that have adopted the euro currency to discuss the health of European banks and to coordinate on measures that may be necessary to head off another financial crisis, like the one that embroiled Greece last year. There have been worrying signs that European banks are heading towards a crisis of liquidity that could have a far reaching impact on the financial system, and, in particular, on European citizens’ savings and investments in the banks.The Italian government wants the EU to make an exception in EU regulations that prohibit state aid to banks.  Italy wants to act swiftly to protect the loans and savings of private citizens in Italian banks. To calm public concerns, and optimistic that an agreement will be reached, the Italian Finance Minister Pier Carlo Padoan stated reassuringly: “Italian citizens’ savings will be protected by the government.” The Renzi administration argues that these measures are precautionary and Italian banks are not yet facing an acute crisis, the real risk resides in other European countries. Indeed, there is growing concern across Europe about the health of European banks, the likelihood of another financial crisis, and, especially among EU officials, the domino effect that ‘stretching’ EU rules on government bank bailouts might have.

In the same interview, Matteo Renzi reversed what had seemed a new openness to break up the vote on the Italian constitutional reform into several parts. He unambiguously declared in an interview to Corriere della Sera that breaking the reform vote is completely out of the question, adding that  he is not afraid of losing the vote and being forced to resign. He seemed confident that those currently opposed to the reform will change their minds and support the bill.

A small delegation of Five Star Movement (M5S) parliamentarians just returned from a controversial trip to Israel, during which they were barred by the Israeli government from traveling to the Palestinian territories. Some members of the delegation reacted angrily stating that “this is not a good sign for peace”. M5S representative Manlio Di Stefano, in an interview with La Stampa, clarified the party’s office stance in support of appeasement between Israel and Palestine and  called on Israel to take the lead in driving peace, a veiled criticism of the Israeli government for blocking progress.

The Italian parliament has just begun to debate a law aimed at tackling growing poverty. The leftist opposition party Sinistra Italiana (SI) proposed  a series of measures to finance a minimum monthly salary of 600 Euros. Italy is one of the few remaining countries in Europe whose government does not have this kind of guarantee in place. The money would be generated from Italy’s inheritance tax.

In other news, the Italian ‘Finance Police’ (the equivalent of the U.S.’s IRS) has raided several of the Rome City Council’s offices, as well as other administrative offices throughout the city, in search of documents related to ongoing investigations into possible corruption in  the construction of Rome’s third subway line.

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