Writing for The Telegraph, Tim Wallace and Szu Ping Chan illustrate that the ‘le sofferenze’ or ‘the suffering’ have been ‘unwanted and ignored’ as theirs is a national problem left unsolved.
As bad debts drain banks of profits and economic growth not seeing the possibilities are damaging the entire country and it may seep throughout the entire Eurozone.
The £300bn worth of loans from Italy’s banks show borrowers unable to repay their debt with the amounts increasingly becoming expensive to resolve.
Banks are struggling to provide new credit to households and firms that need them in consequence.
According to the writers, the UK, Ireland and Spain — during similar times — would often ‘bite the bullet’ and ‘clean-up’ their banks. The writers highlighted this was not the case for Italy.
Italy’s government intended to have consumers pay the debts or have the investors, shareholders and bondholders. However, most bondholders are also households, who may have to pay more than they need to resolve the losses of the bank.
Banks have ignored the bad loans for so long, which had the country continue further until it hit the problem that the financial trouble grew bigger especially from 2010 to today.
Italian bank loans have turned expensive and impossible to resolve by 2013. Debt had soared in high rates of NPL from 16 to 20% increases.
If no compromise is reached between Rome, which wants to protect bondholders, and the EU, which wants to enforce the rules, it could even bring down the eurozone.
“This could be a bigger risk than Brexit,” says a lawyer who is close to the situation.
“The Greeks are desperate to be anchored into Europe, they are willing to suffer and suffer and suffer to stay in – I am not sure that Italy is willing to suffer.”