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Archivio per il Tag »financial times«

→  febbraio 13, 2018

Sir, According to Bill Emmott (“Five Star struggles to be Italy’s agent of change”, February 9), the Five Star Movement is the Italian En Marche. It might be appropriate to recall some of its proposals for the upcoming election.

It wants to repeal the Fornero pension reform, which in 2011 saved Italy, then on the brink of bankruptcy, and reduce the age of retirement; to abolish mandatory vaccination of children; to allow the deficit to rise above 3 per cent of gross domestic product and to abolish commitment to a balanced budget (a constitutional mandate which has never been obeyed). On public debt its “theory” is that it is a macroeconomic problem only because it is denominated in euros: it therefore proposes to redenominate it in lire, placing the Bank of Italy once more under the control of the Treasury, obliging it to buy the debt that would not be financed by the market.

If these policies resemble those of Emmanuel Macron’s movement, your previous reporting on French politics seems less than accurate.

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→  maggio 6, 2016


by Gillian Tett

A few years ago I was at a conference discussing the woes of the single European currency, when a central bank official reached into his pocket and flung a euro note on the table. “That’s what’s wrong with Europe,” he declared, pointing to the crumpled piece of paper. “It’s just windows and bridges!”

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→  aprile 2, 2016


Sir, According to Massimo Mucchetti’s “proposal for Telecom Italia’s network” (Letters, March 29), all the “interested parties”, ie Telecom Italia, Enel and Metroweb, should “contribute their fixed networks” to a “New Company (NC) to be floated on an exchange”. Senator Mucchetti is keen to stress that his proposal is not to nationalise the network. However, he fails to provide further details: the terms and conditions at which the networks will be transferred to the NC and what the NC will charge for the use of network by the “interested parties”.

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→  febbraio 22, 2016


By Franco Debenedetti and C.A.Carnevale Maffè

Sir, The deal for helping Italian banks sell off the huge stock of troubled loans satisfies Brussels, because it is not state aid, and therefore is, as you say, at best a half-baked solution. Instead of the “Italian job”, as Martin Sandbu has described it (Free Lunch, FT.com, January 27), we have proposed the “Great Swap”.

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→  febbraio 15, 2016


To proponents of a cash-free society, the survival of the $100 bill is at best an anachronism, at worst a gift to organised crime. Peter Sands, the former chief executive of UK-based Standard Chartered bank, last week called for the note to be consigned to history, alongside other high-value banknotes beloved of drug barons and kleptocrats. They play little part in the legitimate economy, he argues, but a crucial role in the underground economy.

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→  gennaio 27, 2016


articolo collegato di Martin Sandbu

Arigged market price
Almost everything about Italy’s agreement with Brussels over the country’s so-called “bad bank” policy to rid Italian banks of its problem loans should set off alarm bells. It illustrates how halfhearted is Europe’s commitment to reform the way it does banking.

The agreement, as the Financial Times reports today, involves a scheme by which the Italian state will issue financial guarantees for packages of non-performing loans that are burdening the banks’ finances. The guarantees are supposed to help the banks sell off the loans to other types of investors such as hedge funds.

To be clear, getting bad loans off Italian banks’ backs is a good idea. At about €350bn or 17 per cent of the banking system’s total loan book (three times the European average, according to the European Banking Authority’s last transparency exercise), they constitute a large patch of rot on the banking system’s balance sheet. The uncertainty over the eventual size of the losses is bound to restrain both the banks’ willingness to issue loans and their ability to raise capital as and when that becomes necessary. That fact that Italian bank lending is growing again, which is very welcome news, is nevertheless no reason not to shift this uncertainty to investors willing to bear it and whose risk exposure does not damage the wider Italian economy.

It’s such a good idea, in fact, that it’s useful to ask why banks haven’t sold off these loans to foreign hedge funds already. The Italian government’s plan has been to issue guarantees on the bad loans to facilitate their sale. The sticking point with the European Commission has been how to price the guarantees so they don’t constitute a subsidy. The agreement supposedly ensures that the insurance against losses will be sold at the market price for similar loss insurance on equally risky products.

But if it’s the market price, why does the government need to be involved at all? There are plenty of investment banks in the world that will issue loss insurance at a price. And there is little reason to think that the Italian government’s risk assessment is more reliable than a third-party investor’s: on the contrary. The very notion that the government must provide the insurance because the market doesn’t should make us suspicious of the risk it attributes (or rather not) to the loans in question.

If banks are not already selling off loans to private investors, it’s because the price at which they are willing to sell is higher than the price buyers are willing to pay. The reason for that is most probably not that the banks know the loans are better than they look. Instead, it is that a price at which buyers would be interested would expose losses that the banks would rather be without — or pretend to be without.

The only way a state guarantee can get around this problem is by making the bad loans look more attractive to investors, and thereby raise the price they would consider paying to a level that flatters the selling banks. But don’t let Rome and Brussels fool the rest of us into thinking that this is a market price: if the government needs to make it happen, it’s a price at which there is no market.

The alternative policy is, of course, to write down the value of the trouble loans to their real market value, which could be done, for example, by forcing banks to auction them off to the highest bidder with no state-sponsored insurance (banks could buy the insurance privately if they thought it would sufficiently raise the market price). That this has not happened simply illustrates that Rome remains unwilling to apply the spirit of the EU’s new bail-in rules, which requires bank shareholders and creditors to share in any losses. Yet again, a proper restructuring is too much to stomach for a national government.

As Free Lunch has complained during a previous public bout of Italian bank rescues, this unreconstructed attitude illustrates that European governments are still not comfortable with the banking reforms they signed up to in 2012. That is dispiriting but not surprising. That Brussels is willing to play along, however, is both.

Other readables
- An idea developed to address the job displacement due to trade and globalisation may well have a new lease of life in an era of job loss through automation: Lori Kletzler argues for wage insurance, which would compensate displaced workers for the lower salary in whatever job they managed to find.
- New research documents the long-term effect of migrating from a poor to a rich country by comparing winners and losers of New Zealand’s immigration lottery for citizens of Tonga.
- Harvard economist Gita Gopinath chills the optimism about India that many — including Free Lunch — had allowed themselves to feel. about India’s economy. Investment is falling, not just because reform promises have not been kept, but because of growing rot in the banking system. Seventeen per cent of Indian bank loans are in bad shape, and the cost of borrowing has soared.