As Fears of “Bank Run” Escalate, Italian Banks Get €150 Billion Bailout of Empty Promises
by Don Quijones
WolfStreet.com
June 30, 2016
An elaborate confidence game.
As Fears of “Bank Run” Escalate, Italian Banks Get €150 Billion Bailout of Empty Promises
by Don Quijones • June 30, 2016
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An elaborate confidence game.
By Don Quijones, Spain & Mexico, editor at WOLF STREET.
In today’s Europe, the most important rules are made to be bent, if not outright broken. So it goes with Italy’s blossoming banking crisis.
Earlier this week, Italy’s €40-billion bailout proposal was mercilessly scrapped by Germany, on the grounds that it contravened Europe’s new bail-in rules. Cue Plan B, as reports surfaced today that the EU had authorized the country to use “government guarantees” to create a “precautionary liquidity support program for their banks.“ The total amount currently doing the rounds is €150 billion.
That’s a lot of money, even by today’s inflated standards. In the initial bailout of Spain’s saving banks, in 2012, the EU provided Rajoy’s government with just €40 billion of fresh cash. If the latest reports are true, Italy just received almost four times that amount.
But did it, really? Does the money even exist?
After all, government guarantees are not the same as cash in hand. According to Reuters, the ECB’s latest move, which has received scant attention in the press, is more of a political stunt than a prudential one:
[The funds] won’t actually be used, and don’t solve banks’ main problem – capital holes. Instead, the aid has a secondary purpose: to show Prime Minister Matteo Renzi can do deals in Brussels…
Italy is using the panic from the UK vote to ask the European Commission to let it bail out its banks and skip state-aid rules. Getting the green light would provide an even bigger boost to Renzi’s chances in the referendum, yet the Commission may not approve such a flagrant bailout. As such, getting the go-ahead even on unused guarantees is a start.
The Rest…HERE
