Italy’s Debt Deal Will Not End Banking Crisis

Jan. 27, 2016 The agreement aims to address Italy’s large stock of non-performing loans, but ultimately fails to offer a comprehensive solution to the country’s banking woes.

Briefing

|January 27, 2016

The European Commission and Italy on Jan. 26 reached an agreement on a plan to allow Italian banks to offload bad debt with the assistance of state guarantees. Nevertheless, the agreement will not resolve Italy’s banking woes. The acceleration of negotiations over the past weeks indicates that the EU has come to recognize that Italy’s banking troubles are reaching a crisis point and could impact economies across the eurozone. The agreement, however, is modest and limited in scope. The full technical details are not yet available, and it remains unclear whether the plan will succeed in incentivizing investors and banks to participate. What is clear is that the agreement, even if implemented, will not constitute a comprehensive solution for Italy, as the country will continue to struggle to address its banking challenges while adhering to EU rules.

The scheme agreed to yesterday by Italian Finance Minister Pier Carlo Padoan and European Union Competition Commissioner Margrethe Vesta

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