Here is the introduction to an article on the the Italian Banks, the ignored latest problem in the EU. This is by George Freidman on the website geopolitics( geopoliticalfutures.com).
‘We are now at the point where the mainstream media has recognized that there is an Italian banking crisis. As we have been arguing since December, when we published our 2016 forecast, Italy’s crisis will be a dominant feature of the year. Italy has actually been in a crisis for at least six months. This crisis has absolutely nothing to do with Brexit, although opponents of Brexit will claim it does. Even if Britain had unanimously voted to stay in the EU, the Italian crisis would still have been gathering speed.
The extraordinarily high level of non-performing loans (NPLs) has been a problem since before Brexit, and it is clear that there is nothing in the Italian economy that will allow it to be reduced. A non-performing loan is simply a loan that isn’t being repaid according to terms, and the reason this happens is normally the inability to repay it. Only a dramatic improvement in the economy would make it possible to repay these loans, and Europe’s economy cannot improve drastically enough to help. We have been in crisis for quite a while.’
Today’s Wall Street Journal is finally highlighting the issue. It points out that at least 17% of Italian bank loans are bad. Non performing that is . In the 2009 crisis in the US everyone was going bonkers when the number was 5%. Right now it is 1.5% in the US.
Of course, what is being proposed by Italy is something that is counter to the EU rules . A straight bail out with little of the share and bold holders of the banks suffering as a result . You know something that has been going on in Greece in one form or another for years. Germany has huffed about it and says the rules must stay. But we all know how the EU deals with things like this : some massaging at the edges and more money pumped in. Money from better performing economies in the EU. And let’s not forget that Germany’s export dependent economy must not loose customers. It’s something like the The Canadian Government loaning money to a foreign entity in order for that entity to do business with a Canadian company. And the WSJ states that the Italian GDP had not grown in a decade.
Then one wonders why the lowly hard working north eastern Brit whose country is far more competitive and productive therefore than Italy’s , and is being asked to contribute to these ongoing bailouts , votes to get out of this mess? Wonder no more!
A few years ago France was caught cheating on the EU rules by engineering numbers that allowed it to come under the rules for their deficit being within the EU rule . What did they do to achieve that? Oh, just not count their military expenditures.