Dukascopy Bank Team
Dukascopy Bank SA
Robert Bergqvist, Chief Economist at SEB, on Italian economy
German Chancellor Angela Merkel said last week that she expects no banking crisis in Italy, whereas some analysts say that the current situation can become riskier than the recent Brexit. Which point of view do you believe is the closest to reality?
We know that NPLs in Italy is around €360bn according to IMF estimate, which is a very big number. We also know that the Ital-ian economy has shown real problems in creating stable recovery. This means that Italian banks are facing many challenges in the low-interest rate environment. The big question right now is of course if it is right by the Italian government to consider a bail-out or if it should stick to the EU strategy that bail-in comes first.
I am confident with the fact that Europe today has a coordinated supervision on the banks and that we use the same kind of stress tests. We also have experience from dealing with weak banks. So, from that perspective I do not think that we have a banking crisis; nevertheless, banks, especially in the southern part of Europe, are facing many challenges right now.
Some experts say that only one Italian bank, Monte dei Paschi di Siena, faces a severe crisis, while other Italian banks are just in a difficult situation. In your point of view, is it a reasonable assumption or not? Why?
Since the size of NPL is so big, it means that it is a challenge for the whole Italian banking system. The best solution right now for Italy is to make a final decision about bail-in or bail-out and try to create stronger economic growth, which in turn, coupled with lower interest rates should be good news for corporates and it will reduce levels of NPLs.
Should we expect some drastic measures from the ECB's side in regard to the actual situation? If yes, then what kind of measures?
The ECB has already reacted by introducing the LTROII instruments which is providing support both to the corporate sector and the banking sector, when very favourable lending conditions means compensation for lending to corporates.
This overview can be used only for informational purposes. Dukascopy SA is not responsible for any losses arising from any investment based on any recommendation, forecast or other information herein contained.
Recommended Content
Editors’ Picks
AUD/USD gains momentum above 0.6500 ahead of Australian Retail Sales data
AUD/USD trades in positive territory for six consecutive days around 0.6535 during the early Asian session on Monday. The upward momentum of the pair is bolstered by the hawkish stance from the Reserve Bank of Australia after the recent release of Consumer Price Index inflation data last week.
EUR/USD: Federal Reserve and Nonfarm Payrolls spell action this week
The EUR/USD pair temporarily reconquered the 1.0700 threshold last week, settling at around that round level. The US Dollar lost its appeal following discouraging United States macroeconomic data indicating tepid growth and persistent inflationary pressures.
Gold trades on a softer note below $2,350 on hotter-than-expected US inflation data
Gold price trades on a softer note near $2,335 on Monday during the early Asian session. The recent US economic data showed that US inflationary pressures staying firm, which has added further to market doubts about near-term US Federal Reserve rate cuts.
Ethereum fees drops to lowest level since October, ETH sustains above $3,200
Ethereum’s high transaction fees has been a sticky issue for the blockchain in the past. This led to Layer 2 chains and scaling solutions developing alternatives for users looking to transact at a lower cost.
Week ahead: Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.