Italy Warns Sudden Collapse Of Alitalia Would Lead To “Great Shock” For The Economy
That Italy has a bank solvency problem will not come as a surprise to anyone who has been following events in Europe for the past 7 years.
Just yesterday, Italian daily La Stampa reported that four months after the third government bailout of Italy’s third largest bank in as many years, the Italian government may have to inject even more cash than planned into Monte Paschi, the world’s oldest and apparently always insolvent bank.
Stampa cited the outcome of an ECB inspection, focusing on uncertainties from the bank’s planned bad loan reduction. The Italian daily noted that the ECB had communicated results of its inspection to the bank last week, noting that losses are now expected to be well above those calculated until now. Specifically, while the proposed €8.8BN recapitalization would be sufficient to take the bank’s CET1 above the required regulatory level, it would not be sufficient to meet the ECB SREP requirements, raising the risk the government will have to contribute more than the €6.6BN currently envisaged.
But while Monte Paschi continues to be a perpetual drain of taxpayer funds, the most imminent threat facing the Italian economy comes not from the banking sector, but from its just as troubled national airline carrier. Last week, Alitalia said it had exhausted all options after workers voted against job cuts aimed at salvaging the cash-strapped Italian airline, pushing it toward administration for the second time in a decade.
According to Bloomberg, a €2 billion recapitalization tied to the savings plan is effectively dead and Alitalia would start appropriate “legal procedures” as funds run out, the Rome-based airline said. Chairman Luca Cordero Di Montezemolo “formally” communicated to the Italy aviation authority that the carrier decided to start the process of naming a administrator, the authority said on its website last Tuesday.
…click on the above link to read the rest of the article…
