“One theme which could dictate near term direction for markets and which, arguably, Brexit has reignited and brought back to the forefront, is the ailing and fragile state of the Italian banking sector,” Deutsche Bank’s Jim Reid commented in his Early Morning Reid note back in July. Italy’s financial sector is plagued by an enormous surfeit of bad loans so great that the government was, in April, forced into rallying bank executives, insurers and investors to put €5 billion (£4.2 billion, $5.57 billion) behind a rescue fund for its weakest banks.
EU rules are rigid and state that bond holders should bail out the banks, as in most countries the holders of the bonds are sophisticated people who have made returns in excess of the safe rate that represents the risk. But if you look at Italy it represents a case where, for a variety of historical reasons, among the bondholders there appear to be a lot of ordinary individuals. If that is the case, when you make them bear the cost you are really going after depositors, this happened in Cyprus and, to a certain extent, is what happened in Spain with CAM Bank and Bankia.
It would appear that the EU rule that you ought to let the bondholders bear the cost looks like it may not be the right rule for Italy. European rigidity may have very high costs both for democracy and for Italy, and for – if there’s a referendum in Italy – the future of the eurozone.
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During these unprecedented times the Corona Virus pandemic has impacted so many lives in so many ways. The fact that every country in the world is affected and having to take measure to help support their economy will have such profound long-term consequences that governments are forced to take actions never before seen. You have probably seen the headlines: Australia pumping $66Billion into their economy, Spain €200 Billion, UK £500 Billion, USA $2Trillion, the list goes on.
The Nuffield Trust has recently unveiled some worrying predictions regarding what tens of thousands of expats returning to the UK for healthcare following Brexit could mean for the NHS.