“We Won’t Be Lectured” – Italy’s Renzi To Defy Brussels Over Banking Bailout
With all eyes distratcted by the post-Brexit euphoria, the last week has seen a far more existential crisis accelerating in Europe. Italy’s banking system is in tatters (from a EUR40bn bailout 6 days ago, to EUR150 emergency support 3 days ago, to a bank bailout and chatter of further support from pension funds Friday) but, in what seems like a clear admission that things are really bad, The FT reports that Italian prime minister Matteo Renzi is prepared to defy the EU and unilaterally pump billions of euros into its troubled banking system if it comes under severe systemic distress, a last-resort move that would smash through the bloc’s nascent regime for handling ailing banks.
As we noted previously, Brexit will be just the scapegoat used by Renzi and Italy to circumvent any specific eurozone prohibitions. And if it fails, all Renzi has to do is hint at a referendum of his own. Then watch as Merkel scrambles to allow Italy to do whatever it wants, just to avoid the humiliation of a potential “Italeave.”
And sure enough, as The FT reports, Matteo Renzi, the Italian prime minister, is determined to intervene with public funds if necessary despite warnings from Brussels and Berlin over the need to respect rules that make creditors rather than taxpayers fund bank rescues, according to several officials and bankers familiar with their plans.
The threat has raised alarm among Europe’s regulators, who fear such a brazen intervention would devastate the credibility of the union’s newly implemented banking rule book during its first real test. In the race to find workable solutions, Margrethe Vestager, the EU’s competition chief, has laid out options for Rome to address its banking problems without breaking the bail-in principles of Europe’s banking union.
…click on the above link to read the rest of the article…
