The International Monetary Fund (IMF) has appealed to Italy to restore its ailing banks as soon as possible. “The financial sector reform is crucial to establish stability and to support the recovery,” according to a country report for Italy.
Given the Proposed referendum on United Kingdom membership of the European Union-vote that triggered the financial shockwaves, corrected the IMF its growth forecast for Italy down: below 1 percent (previously: 1.1 percent) this year and around 1 percent in the coming year (previously: 1.3 percent). The outcome of the referendum in the UK have the volatility of financial markets and increased risk of kickback for Italy, the Fund announced after a meeting with Italian authorities. The country stands before “monumental challenges”.
Although the country’s economy have recently recovered somewhat, according to the report. But the structural problems are still large. These included low productivity, high unemployment and little investment.
A particular threat are the 360 billion euros of bad loans burdened the country’s banks, the IMF said. Given the low economic growth it would be difficult for the banks, their own efforts to solve the problem of their bad loans. “This suggests that additional measures are necessary.”
The authorities have already initiated a number of important reforms, according to the working paper of the IMF. But: “It is imperative that these efforts be fully executed and deepened.”
The government of Matteo Renzi wants to support the ailing banks with public money. Under the new EU banking Directive should, after the experiences of the financial crisis 2008/2009 state aid for ailing banks but actually may only flow after shareholders and private creditors were consulted (more Renzis plan can be read here).
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