In the latest geopolitically rocking election revolt against the establishment everywhere, Italy’s Prime Minister Matteo Renzi became the latest casualty of the mighty populist wave sweeping like an unstoppable tsunami across the developed nations. The referendum “no” vote on which he had staked his future garnered 59% in a 70% voter turnout.
As a result of the pro-European Union prime minister’s fall, long-term troubled and third largest Italian bank Monte dei Paschi di Sienna ultimately failed its desperate efforts to raise 5 billion euros of much needed capital to rebuild its devastated balance sheet. It has twice failed the European Central Bank’s infamous stress tests and been officially branded as the weakest link in a chain of continental banks plagued by years of debilitating problems.
Italian politics are now on a collision course with Beppe Grillo’s populist Five Star Movement. The more urgent problem of the moment is Italy appealed this past Thursday to the ECB for more time to save the world’s oldest bank from imminent collapse. The response from the ECB stunned many Italian establishment figures.
The European Central Bank will not allow ANY extra time for struggling Italian Monte Paschi to front the billions in euros of extra capital it requires to continue financing its bad book of failed loans. The 28 billion euro sour loans are close to pushing the bank off the cliff. Many analysts and economists have already observed that the triumphant victory of the “no” camp will now accelerate the crisis in the overall Italian banking system, already sitting near the abyss of complete collapse.
Is the ECB unconcerned by the impending danger that poses a substantial contagion risk for the 26 remaining European Union states’ banks? In their calloused response they claimed they have given Monte dei Paschi more than enough time to address its failed loans. The ECB said they should have resolved them by now since they first failed the stress tests back in 2014.
The embattled bank’s shares tanked another seven percent Thursday once Reuters broke the news to markets. Never mind the one bank though; Italy is near having to make the do or die decision to provide a state bailout in order to stem the contagion from taking down ALL of the other Italian banks now. The European Commission could choose to censure and fine Italy for providing illegal state aid to the bank.
Fitch the credit ratings agency wrote in a note Tuesday that the results of the referendum may also harm plans in the works for recapitalizing numerous other Italian banks, including banking giant UniCredit. Fitch warned that this would “have negative implications for the broader banking sector, whose attractiveness with investors has already reduced significantly during 2016. The sector’s ability to access the institutional markets for funding and capital, which has become more difficult and expensive this year, could deteriorate further.”
The only other alternative is a politically suicidal bank bail-in that would wipe out all of the investors, creditors, and bondholders in Monte Paschi. You are talking about pensioners losing their entire life savings throughout Italy if this happens. Televised scenes of broken Italian retirees would not look good for the future of other troubled Italian lenders, or German, Spanish, and French banks either.
Is Your Portfolio Bank of Monte Paschi-Collapse Proof?
Do not make the mistake of thinking that America’s banks are immune from the virus infecting the Italian banks and by extension overall continental European banking system. They are also mostly one step away from disaster. You do not want your money in bank stocks, or the overall stock or bond markets, when these titans begin to crater.
You can protect your retirement and investment accounts through putting some of your capital into gold and the precious metals physically. Obtain your no-obligation, completely free gold IRA rollover kit from Regal Assets. Simply click here to gain all of the important and relevant information on the best ways to safeguard your own portfolio with tangibly held gold and/or silver today.