Italy

Most experts debating bail-in and bail-out strategies agree that banks should build capital and shrink balance sheets as the best way to avoid a collapse and rebuild after one. But researchers are suggesting a more personalized version of that recipe that makes the difference between life and death for struggling firms, a Bloomberg View reported.

The Italian government is hoping to avoid the break-up of Alitalia by insisting it will give preference to bids for the entire company at the launch of the final stage of its sale out of bankruptcy, the Financial Times reported. On Tuesday, the state-appointed commissioners running the airline since it collapsed into administration in May set out the key conditions for tabling bids in the upcoming public tender. They specify offers for all of Alitalia, or separate bids for the airline operations, which includes maintenance, and for the group’s airport ground handling activities.

Italy took the final steps to revive Banca Monte dei Paschi di Siena SpA, setting the price for its portion of the aid package needed to keep the world’s oldest bank in business. The government will pay 6.49 euros per share as part of the bank’s capital raising, according to a statement from the lender, Bloomberg News reported. Italy earlier this week published two decrees, setting terms for a so-called precautionary recapitalization of the bank, according to the statement. The Siena-based lender needs state support to survive, even though regulators have declared it solvent.

The French government has decided to nationalise the STX France shipyard in an ownership standoff with Italy, Le Monde newspaper reported on Thursday. The Economy Ministry would not comment on the report when asked by Reuters, but said it would hold a news conference on the subject at 3:00 pm (1300 GMT). Economy Minister Bruno Le Maire had given the Italians until Thursday to accept an offer for 50/50 ownership of the shipyard, brandishing the threat of a temporary nationalisation to buy time to find another solution if the offer were rebuffed, Reuters reported.

Italian banks should take additional measures to materially reduce their pile of soured debt and improve efficiency, according to a report from the International Monetary Fund, Bloomberg News reported. “Banks’ non-performing loan reduction and restructuring strategies should be ambitious, and credible, aided by supervisory assessments,” the Washington-based IMF said Thursday after its annual review of the country’s economy and finances.

It’s hard to be a confident investor in Italian bank debt. The recent rescues of Monte Paschi di Siena, Popolare Vicenza, and Veneto Banca are simply the latest reasons over the past few years. Markets have responded by cutting off bond funding to Italian lenders, the Financial Times reported in a commentary. The amount of Italian bank bonds outstanding has shrunk by about 30 per cent since the start of 2015. The decline in volumes has gone along with increasing yields on subordinated and senior unsecured notes.

As Europe’s era of easy money slowly draws to a close, the talk in Frankfurt and London is of bond yields, exchange rates and core inflation. In this medieval city at the foot of the Apennines, it’s all about trains. A stimulus program by the European Central Bank helped revive the train factory that is the largest employer in Pistoia, hauling the city out of a deep economic slump and putting people back to work.

Bank of Italy Governor Ignazio Visco welcomed on Wednesday a European Union proposal to set up state-backed vehicles to buy bad loans off banks, but said participation should be voluntary, the International New York Times reported on a Reuters story. In an effort to speed up the unloading of bad debt by banks, EU finance ministers on Tuesday approved a blueprint to create national "asset management companies" that could help develop the market for bad loans. "We believe such a measure would potentially be useful," Visco said in a speech to the Italian banking association.

Italian banks are out of the emergency room. There is a long convalescence ahead, but it is good news for the recovery of Europe as a whole. The healing under way in Italy and elsewhere is making room for new lending, which can help to fuel economic growth. Monte dei Paschi di Siena, Italy’s most troubled big bank, finally struck a deal with European regulators to complete its €5 billion ($5.7 billion) bailout this month, The Wall Street Journal reported.

Bank failures in Italy and the drawn-out rescue of Banca Monte dei Paschi di Siena SpA revealed the frayed edges in Europe’s patchwork of rules for dealing with firms in crisis, and fixes are needed to make the system work as intended, according to Elke Koenig, who makes the call on saving or shuttering major euro-area lenders, Bloomberg News reported. “Let’s try to look at the cases we had and see how to align the rules better,” Koenig, who heads the Single Resolution Board in Brussels, said in an interview.