Banks

IMF warns Italy against Bank risks

Italy wants to support its ailing banks with a rescue program from tax funds. The IMF is strictly against it and the financial sector in the Euro country’s also not a good testimony.

Alone the Banca Monte dei Paschi di Siena has doubtful credit claims of around 47 billion euros

The International monetary Fund (IMF) is urging Italy to restructure its ailing banks as soon as possible. “The Reform of the financial sector is crucial to attain stability and to support the recovery”, – stated in the current country report for Italy. Even in the face of a Brexit vote, which was triggered in the financial markets, shock waves, corrected for the IMF to its growth forecast for Italy to less than one percent (previously 1.1 per cent) this year and around one percent in the coming year (previously 1.3 per cent) to the bottom.

Structural problems and doubtful loans

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Although I have recovered the economy of the country, but the structural problems are still large, it said. These include low productivity, high unemployment and little investment. Special attention is put on the monetary Fund to the ailing banks, the doubts have piled up bad loans, with a value of approximately 360 billion Euro. Given the low economic growth it will be difficult for the banks to solve on my own and in a reasonable period of time, the Problem of non-performing loans.

“This suggests that additional measures be necessary”, it is clear from a further paper by the IMF. The authorities have initiated a number of important reforms. “It is imperative that these efforts be fully carried out and deepened,” it said.

The government of Matteo Renzi would like to support the struggling banks with public money. According to the new EU banking Directive should be allowed to flow after the experience of the 2008/2009 financial crisis, state aid for ailing banks, but only after shareholders and private creditors, were used. Euro group chief Jeroen Dijsselbloem had refused a new rescue package on Monday. On Tuesday in Brussels the EU Finance Ministers want to discuss the situation in Italy.

German resistance against state aid

Also in Germany, the Bundestag parliamentary groups of the CDU and the SPD have no understanding of the desire for public funding: “The rules for the orderly resolution and restructuring of ailing banks must also be by the Italian government adhered to”, said the economic policy spokesman of the Union, Joachim Pfeiffer, the editor-in network in Germany. “A breach of these rules would be unacceptable.” He accused the Italian government, you have not learned the consequences from the poor performance of the banks in the stress test 2014. For the SPD parliamentary group Deputy Carsten Schneider said: “the credibility of The rules for the protection of all the taxpayers in Europe should not be at the first opportunity questioned.”

Against a the support of Italian banks with taxpayers ‘ money, the chief of the economic experts, Christoph Schmidt said. He described but also a possible way out: “If the social consensus in Italy is not required, to involve small investors in the losses from non-performing loans of the banks, there would be one clear way that does not violate the principle of Bail-in: the handling of the Bail-in, as planned, then the Italian government can compensate the small investors from the budget.”

chr/qu (dpa, rtr)