EGT Italian News

Italy News Summary

            Recently there have been many complaints by Italian business about  the banking system, which should be one of the best in Europe. While Italian banks avoided the toxic financial instruments and there has not been a housing bust, Italian banks are hurt by bed debts from all types of Italian businesses. In fact these debts are increasing by around 20% a year and represent more than 8% of all bank loans (almost 17% of GDP). Some factors for the increasing business debts are the Italian economy which has been shrinking for the past few years, and a slow legal systems (which makes it difficult for creditors to recover owed money). In addition, Italian banks have extended loans to many companies that will not repay them. For example "Alberto Gallo of Royal Bank of Scotland reckons that some 30% of Italian firms owe five times or more than their annual earnings before interest, tax, depreciation and amortisation". 

             Italian bankers are also contributing to the downward spiral, by not giving growing firms loans. Bankers are faced with the possibilities of large write-offs, therefore they do not want to take risks. This lack of loaning hurts the businesses as well. For example, only about a quarter of loan applications were approved, and lending to non-financial firms fell by 9% in the last two years (ECB). 

          This banking crisis will hurt many companies, and if bankers do not start giving loans to growing companies, than this could cause the economy to stagnate. As a result some of these companies may go out of business, which will increase the unemployment rate and lower the GDP. 

        This situation was initiated by the economic crisis of 2008. The recession hurt Italy particularly hard and it has had a hard time recovering. Therefore the mismanagement of loans by banks companies, and the dis-functioning banking system is continuing to hurt the economy. In fact, weak banks are essentially squeezing the life out of the Italian economy, and it has caused some big companies to reconsider asking banks for help

has only continued to hurt the banking system. In fac