👉Bank Runs in Italy — Italy becomes bigger Threat to EU than Brexit !!
, Italian Banks start to Wobble !!
Italy’s banking sector is looking increasingly vulnerable and analysts are starting to fear that the euro zone’s third largest economy could “go under,” warning of the potential for bank runs, credit rating downgrades and the threat to the wider European banking system.
Italy could be a bigger threat to euro zone stability than Brexit .
Italy is too big to fail, too risky to be ignored.
Welcome to The Atlantis Report.
Italy is a country of systemic importance to the global economy.
Having an economy 10 times the size of the Greek economy.
As such, it has the potential to trigger a global economic and financial market crisis.
Italy is too big to fail for the euro to survive in anything like its present form.
Italy’s public debt is officially estimated to be at around 133% of GDP, making Italy the second most indebted country in the Eurozone after Greece.
However, the official Italian debt numbers do not include the Bank of Italy’s debtor position of more than EUR 400 billion in the European Central Bank’s Target 2 accounts.
If one adds the Bank of Italy’s Target 2 liabilities to the Italian public debt total, the public debt to GDP ratio rises to 160%, taking that ratio to its highest level in over 100 years. Sadly, there is every reason to expect that Italy’s Target 2 balance will worsen in the months ahead as the unsettled Italian political situation encourages capital flight.
As if all of this were not bad enough, Italy’s public debt suffers from the fact that at around only 7 years the average maturity of the debt is relatively short. In practical terms, the country will have to roll over more than EUR 600 billion of its debt over the next three years and more than half of its debt over the next five years. This could prove to be challenging in a less favorable global liquidity environment than at present.
The truth of the matter is that Italy’s adoption of the euro in 1999 was a recipe for economic failure., over the past 20 years, Italy has managed to lose more than 20 percent in competitiveness to Germany. Stuck in the euro, Italy can no longer resort to currency depreciation to correct such losses in competitiveness.Remarkably, Italy’s per capita income is lower today than it was on the eve of Italy’s euro adoption. Equally remarkable is the fact that over the past decade, Italy has experienced a triple-dip recession, and it is yet to regain its pre-2008 crisis output level.
The only historical analogy to this Italy/EU trade imbalance is – in my mind – WWI war debts, which proved to be unpayable – everybody defaulted. Essentially one of the causes of the Great Depression.Italy has only one option – leave the euro, and default on its debts.
lack of economic growth has contributed to the weakening of the Italian banking system. That weakness is underlined by a level of non-performing loans that amount to around 15 percent of the banking system’s balance sheet.
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