The European banking crisis is brewing. Last month alone, the Bank of Italy poured €3.6 billion euros into Banca Marche, Banca Etruria (PEL.MI), CariChieti, and CariFeto to prevent their collapse. The money was funded by financing from healthy banks. This is precisely how the banking crisis began in Austria back in 1931. They took a healthy bank and forced it to absorb a failed one, which was far worse than anyone realized as it took down all the banks.
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Salvini Calls For Elimination Of Italy’s Central Bank, “Prison Time For Fraudsters”
Salvini Calls For Elimination Of Italy’s Central Bank, “Prison Time For Fraudsters”
On Friday, in a moment of predictive insight, Bank of America correctly warned that the greatest threat to EPS – i.e., markets – in the next 3 years “is an acceleration of global populism via taxation, regulation & government intervention.” Just one day later, this warning to the financial establishment was starkly manifest in that ground zero for Europe’s populist revolt, Italy, where the country’s coalition government hinted at where the global populist wave is headed next when he slammed the country’s central bank leadership and stock market regulator, escalating its attacks on establishment figures ahead of the European parliamentary vote in May.
Matteo Salvini, the outspoken head of the anti-immigrant League party, said the Bank of Italy and Consob, the country’s stock market regulator, should be “reduced to zero, more than changing one or two people, reduced to zero”, or in other words eliminated, and that “fraudsters” who inflicted losses on Italian savers should “end up in prison for a long time.”
As the FT notes, this latest broadside against Italy’s financial establishment comes as the two parties which are increasingly at odds with each other amid speculation Salvini may hold elections to become the sole leader of Italy, prepare to run against each other in the European parliamentary elections in May, a contest widely seen as a proxy for national polls. Meanwhile, both leaders have also increased their attacks against targets including the EU and French president Emmanuel Macron.
Confirming the rising animosity between the two coalition partners, the League and Five Star have openly squabbled over the future of an Alpine rail line and migration, while the two leaders’ repeated attacks against France which culminated with Di Maio meeting the leaders of the anti-Macron Yellow Vest moment, triggered a diplomatic crisis which last week saw Paris recall its ambassador from Rome.
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Who Or What Will Push Italy Over The Cliff This Year?
Who Or What Will Push Italy Over The Cliff This Year?
Traditionally, the Eurozone’s GDP numbers of the second quarter of a calendar year are being released in the first few days of August, and this year isn’t any different. And as expected, the updated report contains some not-so-very-optimistic results.
Germany continues to be the main engine of the economy of the Eurozone, as the largest country of the bloc saw its GDP increase by 0.4%which is better than expected as the market was expecting a weaker growth result. Unfortunately Italy is once again stagnating and instead of a small economic growth of 0.2%, the economy’s growth rate fell flat and remained at exactly at the same level, indicating the program of monetary expansion of the ECB isn’t working just yet.
Source: Bloomberg
The lower growth rate (after realizing a GDP increase of 0.3% in the previous quarter) also caused both the International Monetary Fund and the Bank of Italy to revise their growth expectations as both institutions now expect the country’s economy to grow by less than 1% in the current year. That’s a very disappointing result as the quantitative easing program of the European Central Bank was predominantly aimed at reducing the impact of economic contractions in the poorer performing countries. But the situation might actually be even worse than you’d expect.
After all, Italy could be considered to be a semi-failed state, and the current prime minister, Matteo Renzi, was planning to push some reforms through after the summer recess of the country’s parliament. Reforms will definitely be necessary to try to the Italian economy going again, as it’s one of the very few countries remaining short of the pre-crisis levels of the GDP considering Italy’s GDP is still approximately 8% lower compared to the pre-crisis GDP numbers whilst the unemployment numbers are increasing again.
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