11-18-2016, 12:13 AM
*** 18-Nov-16 World View -- After Brexit and Trump, Italy's Five-Star-Movement may be the next surprise
This morning's key headlines from GenerationalDynamics.com
****
**** Italy's Monte dei Paschi di Siena floats desperate rescue plan
****
![[Image: g161117b.jpg]](http://www.GenerationalDynamics.com/ww2010/g161117b.jpg)
Matteo Renzi
As we've been reporting, Italy's Banco Monte dei Paschi di Siena
(MPS), founded in 1472, and the world's oldest operating bank, is
close to collapse because it has $55.2 billion of bad loans on its
book. These bad loans are so bad that it's estimated that selling
these bad loans to a third party would only get 20% of face value.
Because of these bad loans, somebody is going to have to lose
a lot of money. It's illegal under EU rules for Italy's government
to use taxpayer money to bail out the bank, since that simply
transfers the financial crisis from the bank to the whole country,
which would lead to an Italian financial crisis similar to
Greece's financial crisis that we've been reporting for years.
The other choice is for those who invested in the bank, by purchasing
either stock shares in the bank or bonds issued by the bank, will lose
a substantial part of their investments. This might be considered
an ideal solution in some circumstances, but it's a disaster
in the case of Italy, since many bonds have been sold to ordinary
people as a kind of high-interest savings account for those saving
for retirement.
MPS is looking for a deal to save the bank from collapse, and is
under a kind of deadline. Italy is holding a government reform
referendum on December 4, and prime minister Matteo Renzi has said
he'd resign if the referendum fails, which polls indicate is likely.
That would create government crisis that would spook investors
involved in any deal to bail MPS out.
So MPS is floating a last minute deal bondholders (including financial
investors and ordinary people) to offer bank stock to holders of $4.6
billion in bank bonds. It's a great deal until you learn that the
market value of MPS's stock is just $740 million, which isn't going to
go very far in paying off bondholders.
However, bank officials see another sign of hope: Qatar's sovereign
wealth fund, the Qatar Investment Authority, which reportedly holds
$256 billion in assets, is said to be interested in investing in MPS.
New Europe and Bloomberg and Market Mogul
Related Articles
****
**** After Brexit and Trump, Italy's Five-Star-Movement may be the next surprise
****
European leaders were completely unprepared for the passage of the
Brexit referendum and the election of Donald Trump, both the result of
the rise of a younger generation demanding a change.
And now they're bracing for another jarring election result: The
rejection by Italian voters on December 4 of a referendum to reform
Italy's government. Prime minister Matteo Renzi claimed that the
reform would make Italy's government more stable and efficient.
Renzi announced the referendum late last year when his personal
popularity ratings were high, and he said that he would resign if the
referendum didn't pass.
This promise probably made sense at the time, but has been disastrous
in retrospect. Renzi's popularity has been falling, and the promise
has energized his political opponents, particularly the left-wing
populist Five Star Movement (M5S), led by Beppe Grillo, an Italian
comedian, actor, and political activist. M5S received about
one-quarter of the vote in the 2013 elections, has won some major
mayoral elections since then, and has become increasingly popular.
Thanks to M5S's campaigning, it now appears more likely than not
that the referendum will fail on December 4. Renzi has repeated
his pledge that he would resign in that event. Structural problems
that the referendum was supposed to fix will remain in place,
and paralyze the government.
This would likely cause a loss in confidence in the government by
financial investors, and possibly the collapse of the Monte dei Paschi
di Siena bank, forcing the government to bail the bank out. This
would be a violation of EU rules, and could force Italy to leave the
eurozone, replacing the euro currency with its former national
currency, the lira.
A lot of things have to happen before that scenario could unfold, and
until recently it was thought impossible. But Brexit and the election
of Donald Trump were also thought to be "impossible" until they
happened, and now European leaders' nerves are rattled as they
consider the possibility of a third major electoral shock in 2016.
The Local - Italy and UPI and Economist and The Local - Italy
Related Articles
KEYS: Generational Dynamics, Italy, Matteo Renzi, Monte dei Paschi di Siena,
Qatar Investment Authority, Brexit, Donald Trump,
Five Star Movement, M5S, Beppe Grillo
Permanent web link to this article
Receive daily World View columns by e-mail
Contribute to Generational Dynamics via PayPal
John J. Xenakis
100 Memorial Drive Apt 8-13A
Cambridge, MA 02142
Phone: 617-864-0010
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com
Forum: http://www.gdxforum.com/forum
Subscribe to World View: http://generationaldynamics.com/subscribe
This morning's key headlines from GenerationalDynamics.com
- Italy's Monte dei Paschi di Siena floats desperate rescue plan
- After Brexit and Trump, Italy's Five-Star-Movement may be the next surprise
****
**** Italy's Monte dei Paschi di Siena floats desperate rescue plan
****
Matteo Renzi
As we've been reporting, Italy's Banco Monte dei Paschi di Siena
(MPS), founded in 1472, and the world's oldest operating bank, is
close to collapse because it has $55.2 billion of bad loans on its
book. These bad loans are so bad that it's estimated that selling
these bad loans to a third party would only get 20% of face value.
Because of these bad loans, somebody is going to have to lose
a lot of money. It's illegal under EU rules for Italy's government
to use taxpayer money to bail out the bank, since that simply
transfers the financial crisis from the bank to the whole country,
which would lead to an Italian financial crisis similar to
Greece's financial crisis that we've been reporting for years.
The other choice is for those who invested in the bank, by purchasing
either stock shares in the bank or bonds issued by the bank, will lose
a substantial part of their investments. This might be considered
an ideal solution in some circumstances, but it's a disaster
in the case of Italy, since many bonds have been sold to ordinary
people as a kind of high-interest savings account for those saving
for retirement.
MPS is looking for a deal to save the bank from collapse, and is
under a kind of deadline. Italy is holding a government reform
referendum on December 4, and prime minister Matteo Renzi has said
he'd resign if the referendum fails, which polls indicate is likely.
That would create government crisis that would spook investors
involved in any deal to bail MPS out.
So MPS is floating a last minute deal bondholders (including financial
investors and ordinary people) to offer bank stock to holders of $4.6
billion in bank bonds. It's a great deal until you learn that the
market value of MPS's stock is just $740 million, which isn't going to
go very far in paying off bondholders.
However, bank officials see another sign of hope: Qatar's sovereign
wealth fund, the Qatar Investment Authority, which reportedly holds
$256 billion in assets, is said to be interested in investing in MPS.
New Europe and Bloomberg and Market Mogul
Related Articles
- Italy's Monte dei Paschi di Siena, the world's oldest bank, appears close to collapse (04-Nov-2016)
- Italy bank crisis more dangerous to EU than Brexit (05-Jul-2016)
****
**** After Brexit and Trump, Italy's Five-Star-Movement may be the next surprise
****
European leaders were completely unprepared for the passage of the
Brexit referendum and the election of Donald Trump, both the result of
the rise of a younger generation demanding a change.
And now they're bracing for another jarring election result: The
rejection by Italian voters on December 4 of a referendum to reform
Italy's government. Prime minister Matteo Renzi claimed that the
reform would make Italy's government more stable and efficient.
Renzi announced the referendum late last year when his personal
popularity ratings were high, and he said that he would resign if the
referendum didn't pass.
This promise probably made sense at the time, but has been disastrous
in retrospect. Renzi's popularity has been falling, and the promise
has energized his political opponents, particularly the left-wing
populist Five Star Movement (M5S), led by Beppe Grillo, an Italian
comedian, actor, and political activist. M5S received about
one-quarter of the vote in the 2013 elections, has won some major
mayoral elections since then, and has become increasingly popular.
Thanks to M5S's campaigning, it now appears more likely than not
that the referendum will fail on December 4. Renzi has repeated
his pledge that he would resign in that event. Structural problems
that the referendum was supposed to fix will remain in place,
and paralyze the government.
This would likely cause a loss in confidence in the government by
financial investors, and possibly the collapse of the Monte dei Paschi
di Siena bank, forcing the government to bail the bank out. This
would be a violation of EU rules, and could force Italy to leave the
eurozone, replacing the euro currency with its former national
currency, the lira.
A lot of things have to happen before that scenario could unfold, and
until recently it was thought impossible. But Brexit and the election
of Donald Trump were also thought to be "impossible" until they
happened, and now European leaders' nerves are rattled as they
consider the possibility of a third major electoral shock in 2016.
The Local - Italy and UPI and Economist and The Local - Italy
Related Articles
- Fearing more Brexit-like votes, EU abandons fiscal rules for Spain, Portugal, Italy (30-Jul-2016)
- Donald Trump: The honeymoon calm before the storm (10-Nov-2016)
- German official says that 'two clowns have won' in Italy (01-Mar-2013)
KEYS: Generational Dynamics, Italy, Matteo Renzi, Monte dei Paschi di Siena,
Qatar Investment Authority, Brexit, Donald Trump,
Five Star Movement, M5S, Beppe Grillo
Permanent web link to this article
Receive daily World View columns by e-mail
Contribute to Generational Dynamics via PayPal
John J. Xenakis
100 Memorial Drive Apt 8-13A
Cambridge, MA 02142
Phone: 617-864-0010
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com
Forum: http://www.gdxforum.com/forum
Subscribe to World View: http://generationaldynamics.com/subscribe
