ITALY DEBT IN FOCUS - Bad Loans, Bad Bank

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Offline Letsbereal

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Italian Bank Holdings Of Italian Debt Rise To All Time High
« Reply #80 on: April 09, 2013, 05:02:41 PM »
Italian Bank Holdings Of Italian Debt Rise To All Time High
9 April 2013
, by Tyler Durden (Zero Hedge)
http://www.zerohedge.com/news/2013-04-09/italian-bank-holdings-italian-debt-rise-all-time-high

Wondering why the Italian bond market has been stable and "improving" in recent months, with yields relentlessly dropping as a mysterious bidder keeps waving it all in despite the complete political void in the government and what may be months of uncertainty for the country, and despite both PIMCO and BlackRock recently announcing they are taking a pass on the blue light special offered by BTPs?

Simple. As the Bank of Italy reported earlier today, total holdings of Italian bonds by Italian banks hit an all time record of €351.6 billion in February.



Why are local banks loaded to the gills in the very security that may and will blow up their balance sheets when the ECB loses control of the European sovereign risk scene as it tends to do every year?

Because courtesy of ECB generosity, Italian debt continues to be "cash good collateral" with the ECB, and as a result Italian banks can't wait to pledge and repo it with Mario Draghi in exchange for virtually full cash allottment.

In other words, the more debt the Italian Tesoro issues, the more fungible cash the Italian banks have to spend on such things as padding up their cap ratios and making their balance sheets appear like medieval (any refernce to Feudal Europe is purely accidental) fortresses.

Source:

Reuters

http://uk.reuters.com/article/2013/04/09/italy-debt-italians-idUKL5N0CW1HM20130409

Bank of Italy http://www.bancaditalia.it/statistiche/stat_mon_cred_fin/banc_fin/pimsmc/2013/sb7_16/suppl_16_13.pdf


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Offline Letsbereal

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Italy’s Debt to Rise to Record in 2013 as Recession Lingers
« Reply #81 on: April 10, 2013, 06:52:51 PM »
Italy’s Debt to Rise to Record in 2013 as Recession Lingers
10 April 2013
, by Andrew Davis & Lorenzo Totaro (Bloomberg)
http://www.bloomberg.com/news/2013-04-10/italy-s-debt-to-rise-to-record-this-year-as-recession-lingers.html

Italy’s debt will reach a postwar record this year as the recession-hit country borrows to contribute to bailouts and pay arrears to suppliers.

The public debt will rise to 130.4% of GDP in 2013 from 127% last year, Prime Minister Mario Monti’s office said in a statement after his Cabinet reviewed its budget plan.

The budget deficit will drop to 2.9% of GDP this year, putting Italy within the European Union’s 3% limit.

“Many are suggesting we change strategy in the management of public finance,” Monti said at a press conference in Rome.

“Discipline in public finances needs to be maintained in the years to come.

Only if Italy stays out of the procedure for excessive deficit will it be able undertake actions needed for the country, like the recent payment of public administration debts.”

The government forecasts that the euro region’s third- biggest economy will contract 1.3% this year, before expanding by the same amount next year and by 1.5% in 2015, Finance Minister Vittorio Grilli told reporters in Rome today.

Even with the deficit falling and the country projecting a primary surplus of 2.4% for this year, Italy’s debt load, the second biggest in Europe after Greece, will still increase.

The debt level was inflated by a plan passed this month to make €40 billion ($52 billion) in payments over the next two years owed to government suppliers.

The costs of contributing to bailouts of Greece, Portugal and Ireland also boosted the debt load.

Excluding bailout costs, Italy’s total borrowing would be 126.9% of GDP in 2013, up from 124.3% last year.

’Structural Weaknesses’

Italy, with a caretaker government after February’s election failed to produce a clear winner, is plagued by “longstanding structural weaknesses” such as high government debt, the European Commission said today in a report.

That “weighs on the country’s growth prospects through several channels, in particular the high tax burden needed to service the debt.”

The Treasury will spend 5.3% of GDP this year to finance the debt, or approximately €83 billion, the government said in today’s statement.

The yield on Italy’s 10-year bond fell 2 basis point to 4.33% and is now below the level prior to the February elections that left Monti’s caretaker government still in power.

The government expects to achieve €30 billion in savings between 2012 and 2015 from its review of spending and sees revenue of almost 1% of GDP a year from asset sales between 2013 and 2017.
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Offline Letsbereal

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Italian Bad Loans Re-Accelerate - Up 21.7% YoY
« Reply #82 on: May 10, 2013, 02:41:16 PM »
Italian Bad Loans Re-Accelerate - Up 21.7% YoY
10 May 2013
, by Tyler Durden (Zero Hedge)
http://www.zerohedge.com/news/2013-05-10/italian-bad-loans-re-accelerate-217-yoy

With markets screaming that Europe is fixed and Italian sovereign bond spreads back near pre-crisis levels, we thought it somewhat interesting that delinquent loans in the country just surged by their most in almost 18 months as bad debt begin to re-accelerate.

ANSA notes that over €130 billion of Italian debt is currently delinquent (+21.7% YoY) and this comes on the heels of the Bank of Italy's demand that Italian banks increase their loan loss provisions are 'disappointing' audits in March.

As we noted previously, the percentage of loans in delinquency rose from around 3% in 2008 to 6.3% in February 2012, and assuming a relatively flat total private sector credit creation in the last year (which is probably conservative since fragmentation has been soaring), the current percentage of loans in default is approaching 8% of the total.

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Offline Letsbereal

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Italy Embroiled In Latest Derivative Loss Fiasco Through Another Mario Draghi-Headed Scandal
26 June 2013
, by Tyler Durden (Zero Hedge)
http://www.zerohedge.com/news/2013-06-26/italy-embroiled-latest-derivative-loss-fiasco-through-another-mario-draghi-headed-sc

Excerpt:

It was roughly four years ago when details surrounding such Goldman SPV deals as Titlos first emerged, that it became clear how for over a decade, using deliberately masking transactions such as currency swaps, Greece had managed to fool the Eurozone into believing its economy was doing far better, and its debt load was far lower than it actually was in order to comply with the Maastricht treaty’s entrance requirements.

That this happened with the implicit and explicit knowledge of such European and Goldman “luminaries” as Helmut Kohl and Mario Draghi did not help Europe’s credibility.

Now it is Italy's turn.
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Offline Letsbereal

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S&P Downgrades Italy From BBB+ From BBB; Full "Puffery" Statement
« Reply #84 on: July 09, 2013, 03:48:25 PM »
S&P Downgrades Italy From BBB+ From BBB; Full "Puffery" Statement
9 July 2013
, by Tyler Durden (Zero Hedge)
http://www.zerohedge.com/news/2013-07-09/sp-downgrades-italy-bbb-bbb-full-puffery-statement

Just more meangingless drivel form a clueless, paid for rating agency (which recently disclosed it would plead "puffery" in its defense against the US lawsuit) now that the ECB is intent on actually lowering the EURUSD, because unlike last year, there is no (immediate) fear of redenomination risk as a result of a sliding EURUSD. Thank you Japanese carry trade.

As a reminder, "S&P said in its request to dismiss the case that the government can’t base its fraud claims on S&P’s assertions that its ratings were independent, objective and free of conflicts of interest because U.S. courts have found that such vague and generalized statements are the kind of “puffery” that a reasonable investor wouldn’t rely on."

So, if anyone cares what today's puffery is all about, here is the full statement: http://www.zerohedge.com/news/2013-07-09/sp-downgrades-italy-bbb-bbb-full-puffery-statement


Also see Reuters:

S& P cuts rating for Italian bonds to BBB, outlook negative http://www.reuters.com/article/2013/07/09/italy-ratings-sandp-idUSEMN1IO99420130709
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Offline Letsbereal

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Italy Borrowing Costs Rise at Bill Sale After S&P’s Downgrade
« Reply #85 on: July 10, 2013, 02:16:02 PM »
Italy Borrowing Costs Rise at Bill Sale After S&P’s Downgrade
10 July 2013
, by Chiara Vasarri (Bloomberg)
http://www.bloomberg.com/news/2013-07-10/italy-borrowing-costs-rise-at-bill-sale-after-s-p-s-downgrade.html

Italian borrowing costs rose at an auction of one-year bills today after Standard & Poor’s cut the country’s credit rating on concern that the economy will struggle to recover.

The Rome-based Treasury sold €7 billion ($8.98 billion) of 367-day bills at 1.078%, up from 0.962% at the previous auction June 12.

Investors bid for 1.56 times the amount offered, up from 1.49 last month. Italy also sold €2.5 billion of 160-day bills at 0.599%.

Italy’s 10-year bond yield rose 4 basis points to 4.5% after the sale at 11:19 a.m. in Rome, leaving the difference with comparable German bunds at 280.9 basis points.

Standard & Poor’s yesterday cut Italy’s long-term credit rating to BBB, two levels above junk, from BBB+, citing expectations for a weakening in economic prospects and the nation’s impaired financial system.

The outlook on the rating remains negative, the New York-based ratings company said in a statement.

“This downgrade of S&P is a wake-up call for the current government, which has not been able to execute job-market reforms so far,” Alessandro Giansanti, a senior interest-rate strategist at ING Groep NV in Amsterdam, said in a note today.

“Although Italian yields are already priced in for a BBB rating, the downgrade will cause widening pressure and a flatter curve, especially ahead of tomorrow’s auctions.”

The Italian Treasury returns to the market tomorrow with the sale of longer-maturity bonds.
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Offline Letsbereal

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Deutsche Bank Opaque Loans From Brazil to Italy Hide Risk
« Reply #86 on: July 11, 2013, 10:12:43 PM »
Deutsche Bank Opaque Loans From Brazil to Italy Hide Risk
11 July 2013
, by Elisa Martinuzzi & Vernon Silver (Bloomberg)
http://www.bloomberg.com/news/2013-07-11/deutsche-bank-opaque-loans-from-brazil-to-italy-hide-risk.html

Excerpt:

Deutsche Bank, perennially among the top three in global credit markets, made billions of dollars of loans to banks worldwide since 2008 and accounted for them in a way that obscured their continuing risk to investors.

Germany’s largest bank managed to lend to firms from Brazil to Italy while making the transactions disappear from its balance sheet, even though it still is owed the money, according to four people with knowledge of the practice and internal documents provided to Bloomberg News.

Deals totaling €2.5 billion ($3.3 billion) involving Italy’s Banca Monte dei Paschi di Siena SpA and Banco do Brasil SA reveal a technique that obscured Deutsche Bank’s lending reach when it sent cash to the banks, the documents show.

The company had talks about a similar loan to Dexia SA (DEXB) weeks before that firm was rescued, according to the documents, and it used the same accounting for other deals through 2011, two of the people with knowledge of the transactions said.

“We should be very concerned about the opacity and complexity of these transactions,” said Joshua Rosner, an analyst at research firm Graham Fisher & Co. in New York who warned in early 2007 that securities linked to subprime loans posed risks to the economy.

The loans are among €395.5 billion in assets that Deutsche Bank excludes from its balance sheet by offsetting them with equivalent liabilities, according to a person with direct knowledge of the practice.

Deutsche Bank disclosed the amount for the first time in April under new international financial reporting standards.

The total represents 19% of the company’s reported assets of €2.03 trillion.
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Offline Letsbereal

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Italian Banco Popolare, UBI Fall After S&P Cuts Ratings
« Reply #87 on: July 26, 2013, 02:33:46 AM »
Banco Popolare, UBI Fall After S&P Cuts Ratings: Milan Mover
25 July 2013
, by Sonia Sirletti and Francesca Cinelli (Bloomberg)
http://www.bloomberg.com/news/print/2013-07-25/banco-popolare-ubi-fall-after-s-p-cuts-ratings-milan-mover.html

Banco Popolare SC (BP) and Unione di Banche Italiane SCPA led decliners in Milan trading after Standard & Poor’s lowered its ratings on 18 Italian banks, citing higher economic risks.

Banco Popolare, Italy’s fourth-biggest bank, fell as much as 2%, and was down 1.8% to 1 euro at 10 a.m., giving the company a market value of €1.77 billion ($2.3 billion).

Unione di Banche Italiane Scpa (UBI), the country’s fifth-largest lender, declined 2.6% to €3.19, while Banca Popolare dell’Emilia Romagna Scrl (BPE) fell 2.5% to €4.89.

“Because of the increased economic risks we see for Italian banks, we believe they are now more exposed to a deeper and longer recession than we had previously anticipated,” the New York-based ratings company said in a statement late yesterday.

S&P didn’t cut UniCredit (UCG) SpA and Intesa (ISP) Sanpaolo SpA, the country’s two biggest lenders, which had their ratings confirmed.

UniCredit was unchanged at €4.05 euros, while Intesa declined 0.9% to €1.4 euros.

“We agree that credit quality is the main risk for Italian banks and could worsen further if the GDP bottom does not happen in the fourth quarter of 2013 and/or the recovery is too low/too slow,”

Anna Maria Benassi, an analyst at Kepler Cheuvreux in Milan, wrote in a note today.
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Offline Letsbereal

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ECB: Italy will “critically determine the fate of the euro area”
« Reply #88 on: October 28, 2013, 04:55:57 AM »
Euro Jobless Fault Line Festers as Italy Scars Recovery
27 October 2013
, by Stefan Riecher and Lorenzo Totaro (Bloomberg)
http://www.bloomberg.com/news/print/2013-10-28/euro-jobless-fault-line-festers-as-italy-scars-recovery.html

Excerpt:

Euro-area jobless numbers this week may lay bare a fault line scarring the region’s recovery as evidence of Germany’s employment muscle contrasts with the scourge of political quagmire destroying work in Italy.

While the currency bloc’s longest-ever recession has ended, unemployment held at 12% in September, according to the median of 36 forecasts in a Bloomberg survey of economists.

Within that data lies a rift between two of its largest economies, with Italy’s rate seen by economists to have reached 12.3%, the highest since records began in 1977 -- and more than double Germany’s comparable level.

Italy will “critically determine the fate of the euro area” and the region won’t prosper if that country can’t restore economic growth, European Central Bank Executive Board member Joerg Asmussen said last week.

Italian officials predict joblessness in the euro zone’s third-biggest economy will keep rising, against a backdrop of a fragmented coalition jeopardized by the legal woes of former premier Silvio Berlusconi.

“We are still in a very discouraging situation for most of the euro area,” said Anatoli Annenkov, an economist at Societe Generale SA in London.

“That’s particularly true for Italy, where politics has come to a rest and necessary structural reforms are not kicking in at all.”
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Offline Letsbereal

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Italian Banks Seen by Visco Considering Deeper Writedowns
« Reply #89 on: October 30, 2013, 04:26:28 PM »
Italian Banks Seen by Visco Considering Deeper Writedowns
30 October 2013
, by Andrew Frye and Lorenzo Totaro (Bloomberg)
http://www.bloomberg.com/news/print/2013-10-30/ecb-s-visco-disputes-that-italian-banks-have-large-capital-needs.html

Excerpt:

European Central Bank Governing Council Member Ignazio Visco said Italian banks may write down more bad loans as lenders from Rome to Berlin prepare to open their books to ECB oversight.

Tax rules regarding the deductibility of bad loans are set to be modified in the Italian government’s 2014 budget, removing what Visco called a disadvantage for Italian banks compared to European rivals.

The changes “should prompt banks to adopt more prudent writedown policies for bad loans, rendering their balance sheets even more transparent,” Visco, who also is the governor of the Bank of Italy, said today, according to the text of a speech delivered in Rome.

While analysts at France’s Societe Generale SA (GLE) and the U.K.’s Barclays Plc said Italian banks are vulnerable to further writedowns, Visco disputed that they need large capital increases.

“The opinion that the Italian banking system today has strong need of recapitalizations is baseless,” Visco said.

The European Union’s push toward a banking union is setting the standards by which the largest lenders from one country to the next will be judged.

ECB President Mario Draghi, who will oversee the bank exams, said on Oct. 23 that he won’t hesitate to fail lenders whose books don’t meet the standards. Draghi preceded Visco as Bank of Italy governor.


Write-Off? ;) http://www.youtube.com/watch?v=XEL65gywwHQ

Deflationary btw
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Offline Letsbereal

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ECB Caught Using Fictional Rating System for Italian Bonds Used as Collateral
« Reply #90 on: November 11, 2013, 01:30:37 AM »
ECB Caught Using Fictional Rating System for Italian Bonds Used as Collateral for Loans
9 November 2013
, by Mike Shedlock (MISH'S Global Economic Trend Analysis)
http://globaleconomicanalysis.blogspot.com/2013/11/ecb-caught-using-fictional-rating.html

Spiegel online has an article on the non-transparent as well as fictional way the ECB treats Stripped Bonds (Strips) of Italian Banks handed over to ECB as collateral for loans.

Currently ECB rates various Italian Strips with an “A” rating, though no rating agency rates Italian bonds, let alone Strips, with an A.

ECB claims it is correct, because a tiny rating agency, DBRS, still rates Italian bonds with an A. However, DBRS said to Spiegel upon being questioned, that this particular rating was not to be applied to Strips.

Two hours later DBRS sent an email to Spiegel, claiming that they (Spiegel) must not use this information in public.

Via Google Translate from Der Spiegel, with thanks to reader Bernd, please consider The strange standards of the ECB http://translate.google.com/translate?sl=de&tl=en&js=n&prev=_t&hl=en&ie=UTF-8&u=http%3A%2F%2Fwww.spiegel.de%2Fwirtschaft%2Fbewertung-von-staatsanleihen-die-seltsamen-massstaebe-der-ezb-a-930098.html


When it comes to the valuation of bonds, the ECB wants to be independent and transparent.

But that manages to SPIEGEL ONLINE information, not always. In many Italian government securities, the central bank based on a credit rating that is not according to the rating agency for these bonds.

According to information obtained by SPIEGEL ONLINE, the European Central Bank (ECB) has very unusual standards when it comes to the valuation of government bonds, on deposit as collateral for loans.

Specifically, it's about 116 Italian government bonds without coupon interest rate, known as stripped bonds or short strips.

They are currently valued by the ECB and the Italian national central bank with a grade of "A" - although rating agencies actually do not assign that grade.

By assigning an "A" rating, the ECB favors those banks that submit such papers as collateral when they borrow money from the central bank. This especially favors Italian financial institutions.

In the evaluation of collateral, the ECB relies on the scores of the four rating agencies.

While large companies S & P, Moody's and Fitch Italy have credit already on a "B" status downgraded, only the smaller agency DBRS, caries the "A" rating of 116 Italian Strips bonds.

The problem: The agency itself has told SPIEGEL ONLINE stated that their ratings are not applicable for Strips.

Stripped bonds are securities of a special kind: The offshoot of fixed rate bonds are sold to pay the revenue generated interest due to other securities.

They also have a so-called zero coupon: The yield on these strips with some long term will only be paid when due, until then sees the investors in such securities no money.

The profit of the investor resulting from the difference between the purchase price and the redemption at maturity of the bond. It is an investment that requires a lot of trust in the buyer's future solvency of the seller.

In this case, the confidence of future Italian governments apply.

And this must be long: 56 of these strips have remaining maturities of more than ten years, 30 of which are not paid 20 for years, the last three not until 2041.

Fitch rates 107 of the strips as 'B'. The classification used by the ECB should not be used. It's that simple.

Suddenly, DBRS Is Silent

Just three hours after the ECB's reply to the request by SPIEGEL ONLINE, another e-mail came from DBRS: Statements to SPIEGEL ONLINE should not be made public and DBRS would longer comment on this matter.

That's what you call an emergency brake.


Emergency Brake

More than a little pressure on DBRS by ECB president Mario Draghi, coupled with a distinct willingness of the ECB to look the other way?

Ya Think? What other sleight-of-hand magic is the ECB making?

I used the word "Fictional" in the title of this post. "Fraudulent" seems more like it.
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Offline Letsbereal

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Italy Banks’ Bad-Loan Ratio Rises to Highest Since 1999
« Reply #91 on: November 19, 2013, 10:56:48 PM »
Italy Banks’ Bad-Loan Ratio Rises to Highest Since 1999
19 November 2013
, by Sonia Sirletti (Bloomberg)
http://www.bloomberg.com/news/print/2013-11-19/italy-banks-bad-loan-ratio-rises-to-highest-in-almost-14-years.html

Bad loans at Italian banks climbed to the highest in almost 14 years as the nation’s economy endured its longest recession since World War II and sovereign-debt risks drove up funding costs for companies.

Non-performing loans at face value as a proportion of lending increased to 7.5% in September from 5.9% a year earlier, according to data published by the Italian Banking Association today.

That’s the highest since November 1999 and up from 3% in June 2008, prior to the financial crisis, said the Rome-based association, known as ABI.

Italy’s bad-loan data came a day after the Bank of Spain said defaults as a proportion of lending at Spanish banks increased to a record 12.7% in September.

Firms and families in peripheral countries are struggling to repay their debts as unemployment rises, forcing banks to set aside more money for soured loans.

Intesa Sanpaolo (ISP), Italy’s biggest bank by branches, last week reported a 47% decline in third-quarter profit after it set aside more provisions for bad debt.

Spain’s Banco Santander SA (SAN) said 7% of its mortgage loans in the country were in default in September, compared with 3.1% in June.

“Italy and Spain are victims of the same malaise, which is leading to a spiral of less lending and higher bad loans,” Luca Bagato, an international finance professor at Piacenza’s Cattolica University, said by phone.

Non-performing loans in Italy rose an annual 23% to €144.5 billion ($195 billion) in September, ABI said.

Impairments, excluding writedowns, increased to 75.2 billion euros from €58.6 billion a year earlier, according to the report.

“The credit quality in Italy has worsened, especially for small companies, whose bad-loan ratio reached 13.2%,” Gianfranco Torriero, head of strategies and financial markets at ABI, said by phone.
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Offline Letsbereal

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France With Italy, Spain Seek Flexibility in Euro Budget Talks
« Reply #92 on: November 22, 2013, 10:45:28 PM »
France With Italy, Spain Seek Flexibility in Euro Budget Talks
22 November 2013
, by Ian Wishart and James G. Neuger (Bloomberg)
http://www.bloomberg.com/news/print/2013-11-22/italy-spain-face-budget-scrutiny-as-euro-finance-ministers-meet.html

Excerpt:

France, Italy and Spain sought to maximize the flexibility of European Union budget-deficit rules to boost their economies as northern euro-area countries saw little need for stimulus.

The growth-versus-austerity debate was renewed at a meeting of finance ministers in Brussels today, as euro-area governments attempted to coordinate budget policy for 2014 using powers that were introduced earlier this year as part of their response to a debt crisis now in its fifth year.

“No, no, no,” Italian Finance Minister Fabrizio Saccomanni told reporters when asked whether his government would modify its budget.

“Reducing the debt load is also our goal, and we managed that both with fiscal policies by reducing the shortfalls and with additional measures that they have now fully understood.”

National budgets are under pressure after the euro zone’s nascent economic recovery nearly ground to a halt in the third quarter.

The 17-nation economy expanded 0.1%, after 0.3% growth in the second quarter, with unemployment at a record 12.2% and inflation at its lowest level in four years.

The European Central Bank is considering combating the torpor by pushing interest rates into negative territory for the first time.

Germany remains largely untouched by the slowdown, with figures today showing business confidence surged to the highest level in more than 1 1/2 years.
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Offline Letsbereal

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Italian Bad Loans Hit Record High - Up 23% YoY
« Reply #93 on: January 22, 2014, 06:42:45 AM »
Italian Bad Loans Hit Record High - Up 23% YoY
21 January 2014
, by Tyler Durden (Zero Hedge)
http://www.zerohedge.com/news/2014-01-21/italian-bad-loans-hit-record-high-23-yoy

Excerpt:

With all eyes gloating over Ireland's recent ability to issue debt in the capital markets once again (and now with 10Y trading only 40bps above US Treasuries), Europe's game of distraction continues.

However, while spreads (and yields) tumble in all the PIIGS, with Italian yields at almost 7-year lows, it is perhaps surprising to some that Italian bad loan rates are at their highest on record.

Having risen at a stunning 23% year-over-year - its fastest in 2 years, Italian gross non-performing loans (€149.6 billion) as a proportion of total lending rose to 7.8% in November (up from 6.1% a year earlier).

As the Italian Banking Association admits in a statement today, deposits are declining (-1.9% YoY) and bonds sold to clients (-9.4% YoY) as Italy's bank clients with bad loans have more than doubled since 2008.
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Offline Letsbereal

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Italy Unveils Most Bizarre Bank Bailout Yet
« Reply #94 on: February 03, 2014, 01:20:32 AM »
Italy Unveils Most Bizarre Bank Bailout Yet
1 February 2014
, by Tyler Durden (Zero Hedge)
http://www.zerohedge.com/news/2014-02-01/italy-enacts-most-bizarre-bank-bailout-yet

Excerpt:

On Wednesday, Italy's government voted final approval to a decree hiking the value of Bank of Italy's share capital from €156K to €7.5 billion - something that had not been done since the 1930s.

Of course, politicians determining the fictitious value of a central bank is one thing, as idiotic as it may be.

However, what is truly preposterous is the covert bailout that accompanies the decree: a key part of the decision was setting a 3% ceiling on the stake that the bank's shareholders can own in the central bank.

This means, as Reuters reports, that Intessa and UniCredit, currently the central bank's largest shareholders with stakes of 42% and 22% respectively - not to mention two of Italy's most NPL-heavy banks - will have to sell the bulk of their central bank "equity" stakes.

And who will they sell them to?

Why the central bank itself, and in return they will pocket up to €3.5 billion ($4.7 billion) from the sale of their central bank holdings.

Said otherwise, Italy took not only bizarro accounting, but also monetary financing of insolvent banks by the monetary authority, and thus Italy's taxpayers, to the truly next level.

Some more details on this supremely grotesque, and certainly not last, bailout from Reuters:

The decree says the banks have three years to comply with the new rules.

Should Intesa Sanpaolo sell a 39% stake, it could cash in up to €2.3 billion before tax according to analysts' calculations based on the new share capital of the Bank of Italy.

UniCredit could pocket a gross capital gain of around €1.15 billion from the disposal of its 19% stake in the central bank.

The only other lender with a stake in the central bank exceeding 3% is Carige which stands to reap a capital gain of €73 million if it sold part of its holding to comply with the decree.
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Italy Banks May Face Up to $20 Billion Capital Gap, ABI Says
« Reply #95 on: February 11, 2014, 04:31:53 PM »
Italy Banks May Face Up to $20 Billion Capital Gap, ABI Says
10 February 2014
, by Sonia Sirletti and Flavia Rotondi (Bloomberg)
http://www.bloomberg.com/news/print/2014-02-10/italy-banks-may-face-up-to-20-billion-capital-gap-abi-says.html

Excerpt:

Italian banks, which have raised money, sold assets and cut costs to boost capital, may face a shortfall of as much as €15 billion ($20 billion) as regulators scrutinize their balance sheets this year.

“We are confident that the Italian banks will pass the stress test exercise without major problems,” Giovanni Sabatini, general manager of the Italian banking association, said in an interview in Rome.

He agrees with an estimate made by the Bank of Italy of a potential capital shortfall of €10 billion to €15 billion. “That’s manageable.”

Assets of 15 Italian lenders, including UniCredit SpA (UCG) and Intesa Sanpaolo SpA (ISP), are being reviewed by the European Central Bank as part of a comprehensive assessment before it takes over banking supervision for the euro area in November.

“There are several options for lenders to fill the eventual capital gap found during the scrutiny and most will depend on the timing imposed by the ECB,” said Sabatini, 54.

Those alternatives may include share sales, disposals and additional deleverage, he said.

The stress test is the third and final stage of the ECB’s Comprehensive Assessment, an evaluation of whether lenders can survive a downturn.

The first phase identified potentially problematic loans and the second stage is the Asset Quality Review to identify any capital shortfalls.
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EU Cuts Italy Growth Forecast - Debt Will Rise To 133.7% of GDP In 2014
« Reply #96 on: February 25, 2014, 04:06:25 PM »
EU Cuts Italy Growth Forecast Amid Slow Recovery From Recession
25 February 2014
, by Lorenzo Totaro (Bloomberg)
http://www.bloomberg.com/news/print/2014-02-25/eu-cuts-italy-growth-forecast-amid-slow-recovery-from-recession.html

Italy will expand this year less than previously forecast amid a slow pace of recovery from its worst recession since World War II, the European Commission said today.

The euro region’s third-biggest economy “is expected to stage a slow recovery in 2014, driven by stronger external demand,” the Brussels-based commission said today in its winter forecasts.

“Private consumption is expected to rise only marginally and by less than disposable income as households restore their savings.”

The nation’s economy will expand 0.6% this year, according to the commission’s forecasts.

The EU also expects Italy’s public deficit to fall to 2.6% of GDP, after remaining within the 3% limit last year.

In its previous projections released in November the commission predicted 0.7% economic growth and a deficit of 2.7% in 2014.

Italy grew 0.1% in the three months through December.

The rise marked its first expansion after nine quarters, the country’s longest recession on record.

The economy needs to exit a “swamp,” newly appointed Prime Minister Matteo Renzi said yesterday as he asked the Rome-based Senate to back his government in a confidence vote.

His predecessor Enrico Letta’s government targeted a growth of 1% and a deficit of 2.5% of GDP for this year, according to its Sept. 20 budget plan.

Italy’s debt will rise to 133.7% of GDP in 2014, the EU said today.

That’s down from the 134% previously estimated.

In its budget plan Letta’s government initally predicted the debt to rise 133.2% this year.

It then said that the debt could fall in coming months thanks to the planned sale of stakes owned by the state in companies including mail company Poste Italiane SpA.
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Italy’s Biggest Bank, UniCredit Posts Record Loss, Plans 8,500 Job Cuts
« Reply #97 on: March 12, 2014, 09:19:47 AM »
UniCredit Posts Record Loss, Plans 8,500 Job Cuts
11 March 2014
, by Sonia Sirletti, Francesca Cinelli and Elisa Martinuzzi (Bloomberg)
http://www.bloomberg.com/news/print/2014-03-11/unicredit-posts-record-loss-on-bad-loans-goodwill-writedowns.html

Excerpt:

UniCredit SpA, Italy’s biggest bank, posted a record €15 billion ($20.8 billion) fourth-quarter loss as it set aside money for bad loans and wrote down goodwill from acquisitions. It plans to cut 8,500 jobs.

Provisions for doubtful loans soared to €9.3 billion in the quarter, more than double the year-ago level, while impairments, including those on the goodwill of units in Italy,

central and eastern Europe and Austria, amounted to more than €9 billion, the Milan-based lender said today.

Chief Executive Officer Federico Ghizzoni is cleaning up the balance sheet as the European Central Bank reviews lenders before taking over banking supervision in November.

The 58-year-old CEO plans to trim about 6% of the workforce to improve profit as part of a five-year project announced today.

The writedowns are a legacy of his predecessor, Alessandro Profumo, who spent about $60 billion on European takeovers from 2005 to 2008.

Investors pushed the shares to the highest in more than two years, betting the cleanup will work.

“They’re dealing with the past and everyone was aware that they were still dragging around some legacy issues,” said Christian Hamann, an analyst at Hamburger Sparkasse who rates UniCredit shares hold.

“Investors are concentrating on the outlook and that’s pretty positive.”

UniCredit rose 6.2% to €6.42 in Milan trading, the biggest gain since September 2012.

The stock is up 64% in the past year, outpacing the 14% gain in the 43-company Bloomberg Europe Banks and Financial Services Index.
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Renzi’s Government Sees Italy’s Debt-to-GDP Ratio Rising This Year
« Reply #98 on: April 09, 2014, 10:12:44 AM »
Renzi’s Government Sees Debt-to-GDP Ratio Rising This Year
8 April 2014
, by Lorenzo Totaro and Andrew Frye (Bloomberg)
http://www.bloomberg.com/news/print/2014-04-08/renzi-s-government-sees-debt-to-gdp-ratio-rising-this-year.html

Italy’s debt as a percentage of gross domestic product, the euro region’s second-biggest, will continue to rise this year, according to a draft of Prime Minister Matteo Renzi’s legislative plan.

The government predicts the 2014 ratio will be higher than the 132.8% forecast in September by Renzi’s predecessor, Enrico Letta, according to the draft plan, which was obtained by Bloomberg News.

The deterioration is due to Renzi’s intention to accelerate repayment of commercial arrears, without which the ratio would start falling this year, according to the draft.

Italy’s public debt, which stood at €2.09 trillion ($2.9 trillion) in January, has constrained efforts by the last three governments to stimulate the stagnant economy.

Renzi’s cabinet meets today in Rome to approve its three-year budget plan to submit to the European Commission, which has predicted 0.6% GDP expansion in Italy this year.

Filippo Sensi, a spokesman for Renzi, declined to comment on the draft or the figures, saying the approved plan will be presented later in a press conference.

The budget process requires the government to calculate the effect of its planned legislation on the last set of official projections, which came Sept. 20 under Letta.

Italy’s debt-to-GDP ratio ended 2013 at 132.6%.

That was better than the 132.9% forecast in September, when Letta also predicted a decline of 0.1 percentage point in the ratio for 2014.
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Renzi Readies Up to €5 billion ($6.9 billion) in Italy Cuts in Draft Plan
« Reply #99 on: April 09, 2014, 10:18:56 AM »
Renzi Readies Up to 5 Billion Euros in Italy Cuts in Draft Plan
8 April 2014
, by Andrew Frye (Bloomberg)
http://www.bloomberg.com/news/print/2014-04-08/renzi-readies-up-to-5-billion-euros-in-italy-cuts-in-draft-plan.html

Italian Prime Minister Matteo Renzi is seeking as much as €5 billion ($6.9 billion) in spending cuts this year to help keep the budget deficit under 3 percent of gross domestic product, according to a draft plan.

Italy is set to deliver spending reductions of €3 billion to €5 billion in the final eight months of 2014 and conduct €12 billion of asset sales in the year, according to the government’s draft legislative plan, which was obtained by Bloomberg News.

Renzi’s cabinet meets today in Rome to approve a three-year budget to submit to the European Commission.

Filippo Sensi, a spokesman for Renzi, declined to comment on the draft or the figures, saying the approved plan will be presented later in a press conference.

Renzi, 39, needs the spending cuts to help pay for the tax reductions that his government has said will help pull Italy out of two years of economic stagnation.

In addition to the fiscal measures, Renzi is preparing a legislative burst over the next three months to make the labor market more flexible and speed the civil justice system.

“Renzi has got a very strong start and demonstrated capabilities to push though some difficult reforms within a short period of time,” Alberto Gallo, head of macro credit research at Royal Bank of Scotland Group Plc, said in a research report today.

Italy will carry out its plan to repay commercial arrears by October, according to the draft.

The government’s plan to cut its IRAP regional business tax by 10% was reiterated in the draft.
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Spanish, Italian And Greek Debt/GDP Rise To Record Highs
« Reply #100 on: April 23, 2014, 04:10:32 PM »
Define Austerity: Spanish, Italian And Greek Debt/GDP Rise To Record Highs
23 April 2014
, by Tyler Durden (Zero Hedge)
http://www.zerohedge.com/news/2014-04-23/define-austerity-spanish-italian-and-greek-debtgdp-rise-record-highs

Excerpt:

Ask any European why their standard of living is so atrocious (after years of freeflowing debt-funded largesse) and the answer is well-known: austerity.

Also ask any European if austerity means public debt should go up or down and the answer is also as clear: down.

Which is why most Europeans will likely be confused to very confused when presented with the latest Eurostat data according to which not only did Eurozone debt rose remain just shy of all time record highs and certainly increasing from a year ago,

but those PIIGS nations which are the first to blame austerity for everything, such as Greece (net of the debt wiped out as part of its 2012 bankruptcy of course), Portugal, Spain and Italy, all saw their public debt hit all time highs.

Total Eurozone debt closed 2013 at a level of 92.6%, just shy of its all time high and up from 90.7% a year ago, 87.4% two years ago, and so on.

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Italian Bad Loans Surge 26% YoY To Record High (59th Month In A Row)
« Reply #101 on: May 20, 2014, 12:13:42 PM »
Italian Bad Loans Surge 26% YoY To Record High (59th Month In A Row)
20 May 2014
, by Tyler Durden (Zero Hedge)
http://www.zerohedge.com/news/2014-05-20/italian-bad-loans-surge-26-yoy-record-high-59th-month-row

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Italian Debt Swells to Rival Germany as Bond Yields Slide
« Reply #102 on: June 27, 2014, 09:21:40 AM »
Italian Debt Swells to Rival Germany as Bond Yields Slide
27 June 2014
, by Lorenzo Totaro (Bloomberg)
http://www.bloomberg.com/news/print/2014-06-26/italian-debt-swells-to-rival-germany-as-bonds-rally-euro-credit.html

Excerpt:

As Italy’s borrowing costs fall to new lows, its debt is rising to the most ever.

The country owed 5 percent more in April compared with a year earlier, with debt reaching €2.15 trillion ($2.9 trillion), Bank of Italy figures show.

That matches the outstanding borrowing of Germany, the largest economy in Europe and the most of any country on the continent, at the end of last year, according statistics office Eurostat.

While Germany is scheduled to grow 2% this year, Italy will expand 0.3% in 2014, according to a Bloomberg survey.

To ensure its debt is sustainable, Prime Minister Matteo Renzi is under pressure to push through spending cuts and foster growth in an economy burdened by the threat of deflation and the highest jobless rate on record.

“In our forecasts Italian debt will overtake Germany by the end of the year,” said Raffaella Tenconi, an economist at Bank of America Merrill Lynch in London.

“It is particularly important that the government moves ahead with the promised reforms to firm the sovereign credit rating and strengthen further investors’ appetite for Italian assets.”

In the meantime, the repayment of arrears to state suppliers, the contributions to the euro-area rescue funds, lower tax revenue due to the effects of the record-long economic slump and financial servicing costs keep adding to Italy’s debt load.

With the European Central Bank backstopping the euro over the past two years, the yield on 10-year Italian bonds meanwhile fell to as low as 2.69% this month, narrowing the premium over equivalent German bunds to the least in three years.

Italy’s 10-year yield was little changed at 2.84% as of 8:54 a.m. Rome time.
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Renzi Tells Germany to Remember Budget-Busting Path to Growth
2 July 2014
, by Rebecca Christie (Bloomberg)
http://www.bloomberg.com/news/print/2014-07-02/renzi-says-italy-to-push-for-european-growth-not-ask-for-handout.html

Excerpt:

Italian Prime Minister Matteo Renzi urged Germany to recall its own breaking of EU budget rules to spark growth, while pledging Italy won’t seek undue leeway.

Renzi rebutted criticism of his nation’s debt levels by pointing out Germany’s decision a decade ago to flout the EU’s stability and growth pact.

In 2003, when Germany and France rejected the pact’s strictures for a third consecutive year, Italy held the EU’s rotating administrative helm, just as it does for the second half of 2014.

During Italy’s previous EU presidency, Germany was “allowed to violate the limits” as it pursued reform policies that “have allowed Germany now to be a country in growth,” Renzi told the European Parliament yesterday in Strasbourg, France.

Renzi pledged Italy will follow through with its own promised economic changes while also seeking EU policies to promote growth across the 28-nation bloc.

At last week’s summit in Brussels, Italy and France led calls for a more flexible interpretation of EU budget rules in a bid to push back against calls for more austerity from Germany and its allies.

“Austerity and growth are two sides of the same coin,” said Guy Verhofstadt, a Belgian who leads the European Parliament’s liberal bloc. “You need austerity.”

Germany’s Manfred Weber was even more direct.

Addressing Renzi in the parliament yesterday, he reiterated his view that Italy and France don’t want to respect the budget rules that were forced on smaller nations like Greece and Portugal.

Weber heads the European legislature’s largest voting bloc, the European People’s Party, allied with German Chancellor Angela Merkel.
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Renzi’s Stimulus to Prevent Italy Contraction in 2014, Aide Says
« Reply #104 on: July 26, 2014, 10:02:26 AM »
Renzi’s Stimulus to Prevent Italy Contraction in 2014, Aide Says
25 July 2014
, by Lorenzo Totaro (Bloomberg)
http://www.bloomberg.com/news/print/2014-07-25/renzi-s-stimulus-to-prevent-italy-contraction-in-2014-aide-says.html

Excerpt:

Prime Minister Matteo Renzi’s €10 billion ($13 billion) of tax cuts to low-income earners will allow Italy to narrowly avoid a contraction this year, the premier’s chief economic adviser said.

“Without that measure, we would forecast an even worse economic scenario” than the 0.2% rise projected this month by the country’s central bank, Filippo Taddei, head of economic policy in Renzi’s Democratic Party, said today in a telephone interview from Bologna, Italy.

“GDP would rise no more than 0.1% this year” with no intervention.

Earlier this year, Renzi’s government passed a labor tax cut worth €10 billion annually in an attempt to revive domestic demand and spur growth after Italy’s longest recession since World War II.

Renzi admitted for the first time in an interview with Corriere della Sera yesterday that 2014 GDP is unlikely to rise as much as the 0.8% estimated by the government in April.

Warning bells had already sounded with the Bank of Italy citing “considerable uncertainties” in its July 18 economic forecast, and the International Monetary Fund’s World Economic Outlook update predicting a GDP increase of just 0.3% for the euro-region’s third-biggest economy.
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Italy asks EU to exclude infrastructure projects from deficits: minister
« Reply #105 on: August 24, 2014, 03:24:38 PM »
Italy asks EU to exclude infrastructure projects from deficits: minister
23 August 2014
, Rome (Reuters)
http://www.reuters.com/article/2014/08/23/us-italy-economy-eu-idUSKBN0GN08220140823

Italy is asking the European Union to exclude spending on infrastructure projects from the calculation of national budget deficits, Transport Minister Maurizio Lupi was quoted as saying in Corriere della Sera newspaper.
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Italy PM Renzi says growth will be around zero this year - Statistics revisions
« Reply #106 on: September 10, 2014, 04:52:32 PM »
Italy PM Renzi says growth will be around zero this year
10 September 2014
, by Francesca Piscioneri and Gavin Jones - Rome (Reuters)
http://www.reuters.com/article/2014/09/09/us-italy-economy-idUSKBN0H423020140909

Italian Prime Minister Matteo Renzi said on Tuesday that the country's economic growth would be about "zero" this year, a sign the euro zone's third-biggest economy is struggling to climb out of its third recession in six years.

Renzi's forecast is far lower than the government's previous prediction for a 0.8 percent increase.

Renzi also signaled that Spending Review Commissioner Carlo Cottarelli would likely be leaving his post soon.

The 39-year-old Renzi, who took office in February, has pledged to turn the economy around by tackling stifling red tape and corruption, cutting taxes and reforming inefficient labor market rules while keeping a tight grip on public finances.

Italy needs to slash €20 billion in spending next year to keep its deficit at or below the EU deficit limit of 3% of output while making labor-tax cuts and maintaining recent income-tax reductions.

Renzi said spending Cottarelli, a former International Monetary Fund official hired by Renzi's predecessor Enrico Letta, asked three months ago to leave his post for personal reasons.

Numerous Italian media reports have suggested serious tensions between Renzi and Cottarelli over how to cut spending and there has been widespread speculation that he would leave early.

However the prime minister said he asked Cottarelli to stay on until next year's budget was presented in October.

Since taking office, Renzi has tried to persuade European Union leaders to shift policy away from austerity and toward more investment.

Italy will press its case for a switch in EU fiscal policy when the region's finance ministers meet in Milan on Friday and Saturday.

STATISTICS REVISIONS

Renzi may get some help to keep the deficit in line this year and next from a revision to the calculation of Italy's gross domestic product, though the premier said he expects the effect to be minimal.

Statistics office ISTAT said on Tuesday that it had revised gross domestic product figures for 2011, and as a result the ratio of the budget deficit to GDP fell to 3.5% from the originally reported 3.7%.

The revision came after a series of methodological changes, which ISTAT said added 3.7% to total GDP for 2011.

The GDP change will improve Italy's deficit-to-GDP ratios in subsequent years as well, an ISTAT spokesman said, although he could not say by how much.

He also cautioned that changes to the way the deficit is calculated might either increase or counter the benefits from the higher GDP in calculating the deficit-to-GDP ratio.

Under the new public finance calculations, the size of the public sector is increased to include numerous new bodies and the impact of debt-swap operations carried out by the Treasury is no longer counted as part of the budget deficit.

In 2012 and 2013, the deficit-to-GDP ratio came in at exactly 3.0%, the ceiling imposed by European Union budget rules.

In 2013, the deficit was pushed up by 0.2 percentage points by costs incurred on debt swaps.

That effect will be stripped out by the revisions to be published on Sept. 22.

The government has committed to keeping the deficit within the 3% ceiling this year despite increased pressure on public finances as a result of Italy's prolonged economic crisis.

On Sept. 22, ISTAT will issue revisions to the deficit-to-GDP ratios for each year from 2009-2013.

Before the end of this month the Bank of Italy will issue revisions to Italy's debt-to-GDP ratio.

At 132.6% of GDP in 2013, that ratio is currently the second highest in the euro zone after Greece's.

All else being equal, the upward revisions to GDP should slightly lower the debt-to-GDP ratio.

The revisions to GDP increased the 2011 level by €59 billion to €1.64 trillion from €1.58 trillion, ISTAT said.

The changes included new ways of calculating spending on research and development and armaments, counted some illegal activities and made a series of complex changes to statistical sources and accounting norms.
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OECD's Italy forecasts make chilling reading for Renzi
« Reply #107 on: September 16, 2014, 02:31:09 AM »
OECD's Italy forecasts make chilling reading for Renzi
15 September 2014
, by Gavin Jones - Rome (Reuters)
http://www.reuters.com/article/2014/09/15/us-italy-economy-idUSKBN0HA1W920140915

When Italy's center-left Prime Minister Matteo Renzi took power in February by ousting his predecessor Enrico Letta in an internal party coup, he was expecting to benefit from a strengthening economic recovery.
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'Realistic' Italy banks will ask for 37 billion euros in ECB TLTROs: minister
« Reply #108 on: September 17, 2014, 05:46:25 AM »
'Realistic' Italy banks will ask for 37 billion euros in ECB TLTROs: minister
16 September 2014
, Rome (Reuters)
http://www.reuters.com/article/2014/09/16/us-italy-tltro-padoan-idUSKBN0HB25A20140916

Italy's Economy Minister Pier Carlo Padoan said on Tuesday it is "realistic" to estimate that the country's banks will ask for a total of €37 billion in the two offers of the European Central Bank's new long-term loan program (TLTRO) this year.

Padoan spoke in an interview with RAI state television. The ECB's two lending offers are scheduled for Sept. 18 and Dec. 11.
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Italian bank lending falls for 28th straight month in August
« Reply #109 on: September 17, 2014, 05:48:44 AM »
Italian bank lending falls for 28th straight month in August
16 September 2014
, Milan (Reuters)
http://www.reuters.com/article/2014/09/16/us-italy-banks-idUSKBN0HB1ED20140916

Lending by Italian banks to households and businesses fell for the 28th consecutive months in August, underscoring the scale of a credit crunch which analysts say is helping hold back an economic recovery, banking association ABI said on Tuesday.

Loans to families and non-financial companies fell 1.1% from a year earlier. The decline was slightly smaller than the 1.3% drop recorded in July.

Gross bad loans at Italian lenders continued to rise, totalling €172.3 billion ($223 billion) in July from €170.3 billion a month earlier.
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IMF cuts Italy growth outlook, hikes deficit, debt
« Reply #110 on: September 20, 2014, 02:58:03 AM »
IMF cuts Italy growth outlook, hikes deficit, debt
18 September 2014
, by Gavin Jones - Rome (Reuters)
http://www.reuters.com/article/2014/09/18/us-italy-economy-imf-idUSKBN0HD1U120140918

Italy's economy will shrink in 2014 for a third year running, while the public debt will continue to rise, the International Monetary Fund said on Thursday, calling on Matteo Renzi's government to follow through on promised reforms.

Gross domestic product will fall this year by 0.1% following declines of 1.9% in 2013 and 2.4% in 2012, the IMF said, cutting its previous forecast for growth of 0.3%, made at the end of July.

The IMF, whose forecasts on Italy have been consistently too optimistic in recent years, forecast that next year Rome will see growth of 1.1% - unchanged from its previous estimate - thanks to an improvement in credit conditions and the effects of easing measures by the European Central Bank.

However, the IMF mission chief for Italy said Italian data since the estimates were compiled had been disappointing, so downward revisions for both this year and 2015 can be expected when the fund issues its next round of forecasts in October.

"Recent data has been softening and it does point to downside risks ... we are in the process of revising our forecasts," Kenneth Kang told reporters in a conference call.

Italian growth has averaged around zero since 2000 and has reached 1% only once in the past five years.

Italy's public debt, the second highest in the euro zone after Greece, will rise almost four points to 136.4% by the end of this year from 132.6% in 2013, the IMF said in a report on its annual Article IV consultations with Italy.

It called on Renzi's coalition government to ensure "firm implementation" of its agenda of reforms to tackle record unemployment and increase productivity.

Renzi, who took power in February when he ousted his predecessor Enrico Letta in an internal party coup, is facing mounting criticism over the slow pace of reforms in areas such as the judicial system, the public administration and the labor market.

The IMF estimated that Italy's potential growth rate, the cruise speed at which the economy can grow without generating inflation, is now around zero.

Kang said the fund expected this could rise to around 0.5% "in the medium term."

The Organisation for Economic Co-operation and Development and Italian employers' association Confindustria both forecast this week that Italian GDP would contract 0.4% this year, with the OECD projecting growth of 0.1% next year and Confindustria forecasting 0.5% expansion.

Despite the weakening economy, Renzi will manage to keep the fiscal gap just inside European Union limits this year, the IMF said.

It raised its forecast for the budget deficit to 3.0% of GDP - bang on the EU's ceiling for the third year in a row - from a 2.7% forecast in April.

The IMF also projected that Italy, which in August saw consumer prices post an annual decline for the first time since 1959, would avoid an entrenched period of deflation.

It said consumer prices would rise at an average rate of 0.4% this year, accelerating gradually to 1.0% in 2015.
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Banks in Italy and Spain Take More Than 45% of ECB Loans
« Reply #111 on: September 20, 2014, 03:09:18 AM »
Banks in Italy and Spain Take More Than 45% of ECB Loans
19 September 2014
, by Sonia Sirletti and Macarena Munoz (Bloomberg)
http://www.bloomberg.com/news/print/2014-09-18/banks-in-italy-and-spain-take-at-least-40-of-ecb-loans.html

Excerpt:

Banks in Italy and Spain were among the leading borrowers in the European Central Bank’s first targeted-loan program, taking more than 45% of the €82.6 billion ($106.5 billion) to trim funding costs.

UniCredit, Italy’s biggest bank, said it raised €7.8 billion, while Intesa Sanpaolo, the second largest, took €4 billion.

Banco Santander sought €3.6 billion, a person familiar with the matter said, the most among Spanish banks whose borrowings were disclosed.

The top lenders in Germany and France didn’t say how much they borrowed.

Banks across the euro area took less than some economists had estimated, complicating the ECB’s effort to spur lending to companies and individuals by tying cheap four-year credit to the size of banks’ loan books.

The euro region posted no growth in the second quarter as its three biggest economies -- Germany, France and Italy -- failed to expand or contracted.

“It won’t mean a burst of new lending following this figure,” said Simon Maughan, head of research at financial-analysis firm OTAS Technologies in London.

“It might mean that most banks considered they have sufficient capital and liquidity, but they are not lending because there is not enough pro-growth policy from European governments.”

The ECB, based in Frankfurt, is offering funds to 255 borrowers at a fixed interest rate of 0.15%.

The amount handed out today was below all predictions in a Bloomberg survey, which gave a range of €100 billion to €300 billion and a median estimate of €150 billion.

Italy’s 15 largest banks, whose assets are under scrutiny by the ECB, borrowed €21.1 billion.

ICCREA Banca obtained €2.2 billion on behalf of smaller cooperative banks, pushing the take-up to 28% of the total.

Spanish lenders took at least €14.8 billion.
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Offline Letsbereal

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This Is How Italy "Fixes" Its Unsustainable Debt Problem
« Reply #112 on: September 22, 2014, 07:11:15 PM »
This Is How Italy "Fixes" Its Unsustainable Debt Problem
22 September 2014
, by Tyler Durden (Zero Hedge)
http://www.zerohedge.com/news/2014-09-22/how-italy-fixes-its-unsustainable-debt-problem
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Offline Letsbereal

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Bad loans at Italy banks up 20% in August to record high
« Reply #113 on: October 12, 2014, 09:58:10 AM »
Bad loans at Italy banks up 20 percent in August to record high
9 October 2014
, Mikan (Reuters)
http://www.reuters.com/article/2014/10/09/us-banks-loans-idUSKCN0HY0Z720141009

The Bank of Italy said on Thursday bad loans in the country rose 20% year-on-year in August reaching a new record high as the third-largest economy in the euro zone struggles to recover from recession.

The loans that are least likely to be repaid were worth €173.9 billion ($222 billion) in August, the highest level since the start of the current statistical series in 1998, central bank data showed.

In July, non-performing loans rose 20.5% to €172.4 billion.

At the same time, lending to companies and families continued to contract, with loans to households down 0.8% in August after falling 0.7% a month earlier.

Credit to non-financial companies fell 3.8% after a contraction of 3.9% in July.
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Offline Letsbereal

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EU urging France, Italy to amend budgets to avoid rejection
« Reply #114 on: October 12, 2014, 10:06:05 AM »
EU urging France, Italy to amend budgets to avoid rejection: sources
10 October 2014
, by Paul Taylor - Brussels (Reuters)
http://www.reuters.com/article/2014/10/10/us-france-budget-eu-idUSKCN0HZ1LX20141010

European Union officials are engaged in a last-minute drive to try to persuade France and Italy to change their 2015 draft budgets before they submit them to the European Commission next week to avoid likely rejection, EU sources said on Friday.


Italy declines comment on report EU pressing for budget change
10 October 2014
, Rome (Reuters)
http://www.reuters.com/article/2014/10/10/us-italy-budget-spokesman-idUSKCN0HZ1OG20141010

A spokesman for the Italian economy ministry declined to comment on Friday on a report that European Union officials were pressing for a change to Rome's draft 2015 finance plans, which delay a promised balanced budget target by a year.


Italy not worried EU will reject budget plan
10 October 2014
, Milan (Reuters)
http://www.reuters.com/article/2014/10/10/us-italy-budget-idUSKCN0HZ0LS20141010

The Italian government is not worried that its 2015 budget plan, which delays a balanced budget target by a year to 2017, will be rejected by the European Commission, one of Prime Minister Matteo Renzi's closest aides said on Friday.


EU should not give France more time on deficit target: Dijsselbloem
10 October 2014
, Washington (Reuters)
http://www.reuters.com/article/2014/10/10/us-imf-france-dijsselbloem-idUSKCN0HZ1Q120141010

The European Union should not give France extra time to bring its budget deficit under the EU ceiling, given the country has not undertaken needed reforms during the two-year buffer it was previously given, Jeroen Dijsselbloem, the chairman of euro zone finance ministers, said on Friday.


PM Valls urges Europe to respect France, and its budget
11 October 2014
, Paris (Reuters)
http://www.reuters.com/article/2014/10/11/us-france-budget-valls-idUSKCN0I00SH20141011

French Prime Minister Manuel Valls said on Saturday that it is up to France to decide on its budget and that Paris should be treated with respect by its European partners.
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Offline Letsbereal

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ECB Said to Buy Italian Bonds in Second Day of Purchases
« Reply #115 on: October 20, 2014, 10:48:02 PM »
ECB starts buying covered bonds in fight to revive euro zone economy
20 October 2014
, by Eva Taylor and Blaise Robinson - Frankfurt/Paris (Reuters)
http://www.reuters.com/article/2014/10/20/uk-ecb-policy-coveredbonds-idUSKCN0I911P20141020

The European Central Bank has started buying covered bonds, an ECB spokesman said on Monday, opening a new front in its battle to revive the euro zone economy and keep deflation at bay.
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Offline Letsbereal

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FT Rejects Reuters Unsourced Trial Balloon About ECB Buying Corporate Bonds
« Reply #116 on: October 21, 2014, 02:09:30 PM »
FT Rejects Reuters Unsourced Trial Balloon About ECB Buying Corporate Bonds, Futures Refuse To Plunge
21 October 2014
, by Tyler Durden (Zero Hedge)
http://www.zerohedge.com/news/2014-10-21/ft-rejects-reuters-unsourced-trial-balloon-about-ecb-buying-corporate-bonds-futures-

ECB SAID NOT TO HAVE PUT CORPORATE BOND BUYING ON AGENDA: FT
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Offline Letsbereal

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ECB Said to Buy Italian Bonds in Second Day of Purchases
« Reply #117 on: October 22, 2014, 09:35:09 AM »
ECB Said to Buy Italian Bonds in Second Day of Purchases
21 October 2014
, by Alastair Marsh (Bloomberg)
http://www.bloomberg.com/news/print/2014-10-21/ecb-said-to-buy-italian-bonds-in-second-day-of-purchases-1-.html


Italy’s $2.6 Trillion Debt Giving Spanish Bonds the Edge
21 October 2014
, by Lukanyo Mnyanda and Eshe Nelson (Bloomberg)
http://www.bloomberg.com/news/print/2014-10-21/italy-2-6-trillion-debt-gives-spain-edge-amid-slump.html


ECB Said to Expand Covered Bond Purchases From Spain to Germany
22 October 2014
, by Alastair Marsh and Stefan Riecher (Bloomberg)
http://www.bloomberg.com/news/print/2014-10-22/coene-tells-l-echo-ecb-has-no-proposal-on-corporate-bonds.html


The Italians will fully consume the EU LOlz
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Offline Letsbereal

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Vicious Circle of Bad Loans Ensnaring Italian Companies
« Reply #118 on: November 03, 2014, 09:47:11 PM »
Vicious Circle of Bad Loans Ensnaring Italian Companies
3 November 2014
, by Katie Linsell and Luca Casiraghi (Bloomberg)
http://www.bloomberg.com/news/print/2014-11-03/vicious-circle-of-bad-loans-ensnaring-italian-companies.html

Excerpt:

Italian borrowers are becoming trapped in a vicious circle. As bank loans turn sour at the rate of about €2 billion ($2.5 billion) a month, corporate lending is dwindling to the least in more than a decade.

Lenders are sitting on a total €174 billion of non-performing loans, an increase of 62% from three years ago, according to the latest data from Bank of Italy.

New corporate lending dropped in August to €21 billion, the lowest since at least 2003, the data show.

With public debt of more than €2 trillion, Italy is battling the longest economic slump since World War II that has thrown millions of people out of work.

The scarcity of lending is spurring the European Central Bank’s asset purchase program with President Mario Draghi seeking to boost economic growth by freeing up bank balance sheets.

“Banks’ failure to deal with the soured loans is partly to blame for Italy’s worsening recession,” said Riccardo Serrini, chief executive officer at Prelios Credit Servicing SpA, a Milan-based adviser for debt sales.

“Without the debt burden, they could be helping to boost the economy.”

Unlike lenders from Spain to the U.K., Italian banks are proving unable, or unwilling, to offload bad debts and free up their balance sheets.

About €11 billion of loans where borrowers have fallen behind on payments were sold by Italian institutions since 2011, compared with €189 billion for all European lenders, according to PricewaterhouseCoopers LLP.
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Offline Letsbereal

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Italy’s Long-Term Credit Rating Cut by S&P on Economic Weakness
« Reply #119 on: December 06, 2014, 08:18:04 AM »
Italy’s Long-Term Credit Rating Cut by S&P on Economic Weakness
5 December 2014
, by Lorenzo Totaro (Bloomberg)
http://www.bloomberg.com/news/print/2014-12-05/italy-s-long-term-credit-rating-cut-by-s-p-on-economic-weakness.html

Excerpt:

Italy’s long-term credit rating was lowered by Standard & Poor’s, which cited weak growth prospects and high public debt.

The New York-based company cut its unsolicited long-term rating to BBB- with a stable outlook, from BBB. The BBB- rating is one level above junk, or non-investment grade, status.

“The downgrade reflects the recurrent weaknesses we see in Italy’s real and nominal GDP performance, including its eroded competitiveness, which are undermining the sustainability of its public debt,” S&P said yesterday in a statement.

“We expect the Italian economy to exit recession in early 2015, although we forecast only a modest GDP recovery of about 0.2%, compared with our previous forecast of 1.1% for next year.”

S&P said it projects Italy’s general government debt, excluding European Financial Stability Facility guarantees, to peak at above 133% of GDP in 2016, with net general government debt at about 127% of GDP.

S&P said it expects the general government debt to amount to €2.3 trillion ($2.8 trillion) by the end of 2017.

Italy is struggling to emerge from its longest economic recession ever as the country’s unemployment rate rose to a record 13.2% in October.

Exports failed to offset the effect of weak domestic demand and falling investment in the three months through September, meaning the country’s GDP contracted in the last 11 out of 13 quarters, statistics agency Istat said this week.
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