Italy set to bail out struggling banks

Italy set to bail out struggling banks

The Italian Parliament has approved a possible €20 billion ($28.9 billion) bail-out plan for the country’s struggling banking sector.

As reported by the BBC, the Italian Treasury is set to inject fresh capital into it’s struggling banking sector and possibly save Banca Monte dei Paschi di Siena, the world’s oldest bank and sometimes regarded as Europe’s weakest, owing to its high level of bad loans.

Speaking to InvestorDaily in 2015, Perpetual head of investments Matthew Sherwood cautioned that Italy’s growing debt, which at the time was bigger than Greece’s was in 2010, was too high to fix.

“Italy can’t grow its way out of its debt problems; it can’t inflate its way out, that really only leaves default,” he said.

Mr Sherwood described Italy as Europe’s “problem child” and predicted at the time that debt would continue to grow.

Regardless, risks associated with the state of Italy’s banking sector are unlikely to have a large impact on Australian investors, according to AMP Capital chief economist Shane Oliver.

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