BANKING CRISIS IN ITALY: THE NEXT DOMINO TO FALL IS FRANCE…(As Bill Holter Said,”It’s Over”…)

Thursday, August 4, 2016
By Paul Martin

By Gold Broker
TheDailyCoin.org
August 4, 2016

We’ve already talked about the banking crisis in Italy, with 360 billion € in bad loans, the equivalent of 22% of its GDP, an inordinate amount that leads us to fear the worst. The situation has been temporarily stabilised after a deal between the head of government and Brussels: a bailout plan has been negotiated with the Italian State, which gives time for the constitutional referendum in October to take place, where Mario Renzi will put his head on the block. If he wins, he might be able to play for time; otherwise, the political crisis will accelerate things…

Ahead of that, it is important to know what country would suffer the most following a collapse of the Italian banking sector. It is France, no doubt, largely ahead of the other European countries. According to data from Deutsche Bank and the Bank for International Settlements, global liabilities of the French economy towards its Italian neighbour, including banks and non-financial private sector, total more than 300 billion euro, way ahead of the second-place country, Germany, with around 100 billion euro. Both economies are largely intertwined, albeit favouring France, regularly accused of buying back the gems of the local industry in luxury items, telecoms, on top of having major participations in the insurance and banking sectors. Although one should not worry too much about the luxury brands acquired by the French, LVMH and Kerig (Fendi, Bulgari, Gucci, Brioni etc.), liabilities in the insurance and banking sectors could end up being quite costly should a financial crisis arise.

A serious Italian banking crisis would thus touch France immediately, and the whole Euro zone would tremble. But, of course, we can always count on Mario Draghi to start the ECB’s printing presses again to try to drown the gaping holes of the banks’ balance sheets under a deluge of liquidity. But there is no guarantee that will be enough, since the solvency and credibility of the Italian and French banks are called into question.

The Rest…HERE

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