Italy’s dilemma after Merkel-Hollande agreed loose banking union

 European Council meeting 22/5/2013: Herman Van Rompuy, President of the European Council, Enrico Letta, Italian Prime Minister From (from left to right). (European Council photographic library).


European Council meeting 22/5/2013: Herman Van Rompuy, President of the European Council, Enrico Letta, Italian Prime Minister From (from left to right). (European Council photographic library).

Last week the President of the European Council Herman Van Ropmuy went to Rome, to meet the Italian Prime Minister Enrico Letta. This was a very significant move by the EU Council President. Italy is the third largest economy of Eurozone with large and more or less competitive private sector productive structures in manufacturing, services and agriculture, which support millions of jobs and constitute its only hope to exit from the present difficult conjuncture. Yet the country is in a most unfavourable position in respect to banking credits to the business sector. Its SMEs have to pay more than triple interest rate costs for the same business risks as their German or French counterparts, a result of Eurozone’s financial fragmentation and persistent substantial country risks. Italy’s dilemma At the same time the new Italian Prime Minister’s political position is very unease. He is supported by a grand coalition of left and right and his manoeuvring space is very limited. In this respect Letta has warned Brussels, Berlin and Paris that Italy will not endanger its productive infrastructure, because Germany and probably France want to use the fragmentation of Eurozone’s financial market to break down his country’s competitiveness, by depriving its private sector from adequate financing. He said that this will mean “the absolute catastrophe”, meaning obviously that Italy could possibly search refuge outside Eurozone and return to the lira. In this way the country would regain its lost competitiveness by a large devaluation. Not to forget that Italy produces such a large array of products as France and Germany taken together and exports annually a wealth of more than €400 billion of goods and services. It is the only south Eurozone country which can survive outside Eurozone, an impossibility for Spain, Portugal and Greece. In this context the Italian demand for the creation of a strong and effective banking union, a new institution which could guarantee a seamless financial market, must be taken seriously under consideration by Brussels, Berlin and Paris. This is of particular importance now, after the French President Francois Hollande and the German Chancellor Angela Merkel agreed last week, that the banking union may not be that much effective and strong so as to guarantee the elimination of the country risk as Letta demands. The European Sting writer Elias Lacon produced a relevant analysis on 31 May. If this is true Italy and the Franco-German axis must be now in dense negotiations. Rompuy’s attempt Seemingly in order to discuss and ponder the Italian reaction to the Paris-Berlin agreement, Rompuy went to Rome on Friday 31 May. The President of the Council however took a step forward and reassured Letta that Brussels do not agree with a loose banking union, which will not be able to secure that the Italian SMEs would have the same borrowing options, as their German and French competitors for the same business risks. Already the entire Brussels bureaucracy in the Commission and the Council has supported the position of the European Central Bank favouring the creation of a banking union that matters to countries in difficulties, like Italy. To make this clear Rompuy after meeting with Letta said, “In June we will also discuss (in the EU leaders summit) the issue of credit to the economy, particularly to Small and Medium-sized Enterprises (SME). The current situation is not satisfactory. In several countries, including Italy, access to credit for SMEs is more difficult and more costly than for SMEs with similar characteristics in other Member States. This is probably one of the biggest obstacles to the recovery right now. The European investment Bank (EIB) can help solve this problem. We expect the EIB to significantly expand the volume and the scope of its activities in support of SMEs. The European Central Bank is also looking at options of addressing the current fragmentation in financial markets and there is scope for joint actions between the EIB and the ECB. To succeed at our June European Council we all need to work hard. And I look forward to continue working with the President and the Italian government“. In this passage Rompuy tries to marry the Paris-Berlin decision for a loose banking union, with the need to cover the financial needs of the SMEs in Italy and elsewhere in the European south. He offers a more strong intervention of the EIB which can offer substantial volumes of cheap loans to the SMEs. By the same token he also reminds everybody that the ECB is in favour of a strong and effective banking union. The problem is however that on the one side the EIB cannot cover all the financial needs of the Italian and other SMEs in Greece, Spain and Portugal. On the other side the ECB cannot by itself create a banking union, being unable to overcome the Paris-Berlin political prerogative. If things are like that, Eurozone is once more before another dead-end, with the south being faced with the dilemma. Either stay in and confront the difficulties of the productive structures with other means, like labour market liberalisation and administrative burden reductions, or get out and face alone their over-indebtedness problems.

Discover more from The European Sting - Critical News & Insights on European Politics, Economy, Foreign Affairs, Business & Technology - europeansting.com

Subscribe to get the latest posts sent to your email.

Interesting reads

© WHO/Hanan Balkhy Displaced families are living in overcrowded tents and makeshift shelters, surrounded by waste and debris, with limited access to safe water and sanitation services.

World News in Brief: Mounting waste in Gaza, drone attacks in Sudan, aid truck struck in Ukraine

This article is published in association with United Nations. Mounting waste and limited access to sanitation sites are deepening health risks for families across Gaza, as humanitarian workers warn that overcrowded dumping areas and worsening living conditions threaten vulnerable communities. Ramiz Alakbarov, UN’s top aid official in Occupied Palestinian Territory visited a dumping site in Gaza […]
This article was exclusively written for The European Sting by Mr. Franco Miguel Nodado, a 4th-year medical student from the Philippines. He is affiliated with the International Federation of Medical Students Associations (IFMSA), cordial partner of The Sting. The opinions expressed in this piece belong strictly to the writer and do not necessarily reflect IFMSA’s view on the topic, nor The European Sting’s one.

Autism Spectrum Disorders in Global Health: Bridging the Gap in  Awareness, Early Diagnosis, and Inclusive Care 

This article was exclusively written for The European Sting by Ms. Georgia Maria Vardalachaki, a medical student from the Medical University of Crete, Greece. She is affiliated with the International Federation of Medical Students Associations (IFMSA), cordial partner of The Sting. The opinions expressed in this piece belong strictly to the writer and do not necessarily reflect IFMSA’s […]
© WHO/Hedinn Halldorsson WHO Director-General Tedros and a health expert during operations involving the MV Hondius off Tenerife amid the hantavirus response.

Hantavirus-hit ship evacuation completed as quarantines begin

This article is published in association with United Nations. The passengers and crew have disembarked from the hantavirus-hit cruise ship MV Hondius in Tenerife and many have returned to their home countries, as the UN World Health Organization (WHO) said the operation demonstrated a “triumph of solidarity”. The repatriation effort, coordinated by Spanish authorities with support […]
© NASA The Strait of Hormuz which separates the United Arab Emirates and Iran is a strategically important shipping route

Strait of Hormuz de-escalation is urgent, says UN chief

This article is published in association with United Nations. As the Strait of Hormuz crisis deepens and tensions between Iran and the United States remain unresolved, oil prices rose again early Monday, prompting the UN Secretary-General to call for a peaceful resolution and warn of the widening fallout across Africa and beyond. “My strong appeal is […]
This article is published in association with United Nations.

Ukraine: Over 3,000 attacks on healthcare since full-scale Russian invasion

This article is published in association with United Nations. The World Health Organization (WHO) has verified more than 3,000 attacks on healthcare in Ukraine since Russia launched its full-scale invasion in February 2022, the UN agency reported on Friday. “During 1,534 days of war, Ukraine’s healthcare system has experienced repeated attacks,” it said.  Every aspect of the system has been […]
WHO Passengers from MV Hondius assisted by Spanish and WHO health teams after disembarking.

Passengers leave hantavirus-hit cruise ship in Tenerife as WHO says outbreak ‘not another COVID’

This article is published in association with United Nations. Passengers and crew from the cruise ship MV Hondius began disembarking in Tenerife on Sunday under a tightly coordinated international health operation led by Spanish authorities and the World Health Organization (WHO), as officials sought to reassure the public that the outbreak “is not another COVID.” The […]
Nuclear energy in the Middle East: A realistic choice or a risk?

Nuclear energy in the Middle East: A realistic choice or a risk?

This article is published in association with United Nations. As global electricity demand grows, so does the popularity of nuclear energy. In the Middle East, several countries are evaluating or advancing nuclear power projects, balancing weighty issues such as regional security, climatic conditions and international cooperation. “Nuclear energy is at the intersection of energy demands, technological […]
© NASA The Strait of Hormuz which separates the United Arab Emirates and Iran is a strategically important shipping route

Bahrain and US float Security Council resolution on the Strait of Hormuz

This article is published in association with United Nations. Bahrain and the United States have circulated a draft Security Council resolution calling for Iran to cease attacks in the Strait of Hormuz, their ambassadors outlined to journalists at UN Headquarters in New York on Thursday. The text is supported by Kuwait, Qatar, Saudi Arabia and the […]
© CDC An enhanced microscopic image shows the Hantavirus.

Hantavirus outbreak: Another passenger contracts disease

This article is published in association with United Nations. It’s been confirmed that another passenger from the cruise liner linked to the outbreak of hantavirus has contracted the disease, which has claimed the lives of three people on board and sparked an international alert coordinated by the UN World Health Organization (WHO). The individual, who is […]
This article is published in association with United Nations.

UN warns of worsening human rights crisis in Mali after deadly attacks

This article is published in association with United Nations. The human rights situation in Mali is rapidly deteriorating following coordinated attacks by armed groups across the country, with civilians killed, displaced and cut off from food and aid, UN rights office OHCHR said on Tuesday. The violence, which erupted on 25 and 26 April, saw large-scale […]
© UNICEF A damaged ambulance in Tebnine in southern Lebanon.

In Lebanon, the same fears and dangers persist despite ceasefire: UNHCR

This article is published in association with United Nations. Death and destruction have continued unabated in Lebanon while communities are still unable to return to their homes despite a ceasefire that began on 17 April, humanitarians said on Tuesday. “Civilians in the south of Lebanon and parts of the Bekaa [Valley] are really living with the […]
© Unsplash/Planet Volumes A computer-generated image shows the Strait of Hormuz.

Uncertainty continues over safety in the Strait of Hormuz

This article is published in association with United Nations. Amid claims and counter-claims of strikes and confrontations in the crucial Strait of Hormuz between Iran and the United States, UN maritime officials continue to urge vessels to exercise “maximum caution”. “We are aware of the reports but do not have further details. We continue to urge […]
© ADB/Ariel Javellana Women farmers in India sell wheat grain and buy fertilizer with the proceeds.

Middle East crisis puts aid, food, fuel further out of reach for millions already struggling – UN agencies

This article is published in association with United Nations. As the Middle East crisis continues the humanitarian fallout is worsening, with aid route disruptions and food and fuel price hikes wrecking the lives and the rights of the most vulnerable people worldwide, UN agencies warned on Friday. Heightened insecurity and instability around key Gulf routes, including […]
© Unsplash/Angus Gray Ship transits through the Strait of Hormuz have dropped by over 90 per cent since the crisis escalated in late February 2026.

Hormuz crisis strangling global economy, Guterres warns, demanding solutions to end stalemate

This article is published in association with United Nations. The escalating crisis in the Strait of Hormuz could push tens of millions into poverty, trigger a surge in global hunger and even tip the world towards recession, the UN Secretary-General warned on Thursday. António Guterres decried the restrictions on free passage through the crucial chokepoint which […]
This article is published in association with United Nations.

AI in advertising risks fuelling information crisis, UN warns

This article is published in association with United Nations. With spending on advertising topping $1 trillion a year worldwide, the United Nations on Wednesday highlighted the untapped power of major brands to shape the future of Artificial Intelligence, warning that a failure to act could deepen a global information integrity crisis. In a new brief titled […]
This article is published in association with United Nations.

2015 nuclear deal ‘no basis’ for any new agreement with Iran

This article is published in association with United Nations. The 2015 nuclear accord with Iran cannot be the starting point for a new agreement with the country, the head of the International Atomic Energy Agency (IAEA) said on Wednesday in New York.  Rafael Mariano Grossi was speaking during a press conference at UN Headquarters held on […]
Credit:Unsplash)

From Hormuz to Lebanon, crisis reverberates through trade routes, upending humanitarian networks

© WHO/Hanan Balkhy In Gaza displaced families are living in overcrowded tents and makeshift shelters, surrounded by waste and debris, with limited access to safe water and sanitation services. This article is published in association with United Nations. Disruptions in the Strait of Hormuz continue to send shockwaves through global food systems, the UN Food and Agriculture […]
© UNICEF/Mohamed Zakaria A displacement centre in El Fasher, North Darfur (file).

World News in Brief: Sudan drone attacks condemned, South Sudan violence, airstrikes in Ukraine, South Africa Freedom Day

This article is published in association with United Nations. The United Nations has condemned two recent drone attacks in Sudan, one of which left seven dead, Spokesperson Stéphane Dujarric said on Monday during his regular media briefing in New York. An aid truck from the UN refugee agency (UNHCR) that was carrying emergency shelter kits came under attack by […]
© IMO/Cihancan Tunay A ship makes its way across an ocean.

Chokepoints and conflict: How the Hormuz crisis is exposing global shipping vulnerabilities

This article is published in association with United Nations. The blockading of ships in the Strait of Hormuz as a result of the conflict between the United States and Iran has demonstrated how ships and seafarers have become “leverage in geopolitical disputes,” according to the head of the UN’s International Maritime Organization (IMO). Since conflict began […]

Why don't you drop your comment here?

Go back up

Discover more from The European Sting - Critical News & Insights on European Politics, Economy, Foreign Affairs, Business & Technology - europeansting.com

Subscribe now to keep reading and get access to the full archive.

Continue reading

Discover more from The European Sting - Critical News & Insights on European Politics, Economy, Foreign Affairs, Business & Technology - europeansting.com

Subscribe now to keep reading and get access to the full archive.

Continue reading

The European Sting – Critical News & Insights on European Politics, Economy, Foreign Affairs, Business & Technology – europeansting.com