Italy

The OECD forecast Italy’s public finances to worsen as fiscal measures are not boosting economic growth. In its latest economic survey, the OECD projects that Italy’s deficit will rise to 2.5 per cent this year and to 3 per cent in 2020, both higher than government forecasts. Italy’s public debt will reverse its declining trend and it is expected to start to rise again, the Financial Times reported. This is in contrast with the government’s expectations of a downward trend in public debt despite higher spending because of projected stronger growth.

The Bank of Italy has appointed an insider as its second-highest ranking official, reinforcing its independence after it came under criticism from Rome’s populist coalition government for its role in the country’s banking crisis, the Financial Times reported. The Bank of Italy said Fabio Panetta, currently deputy director-general and a career central banker, would be appointed director-general in what is seen by officials as a continuation of the status quo at an institution traditionally viewed as a source of stability at times of Italian political turmoil.

Italy is considering compensation claims against the European Commission for the strict interpretation it gave to EU banking rules, the Italian prime minister said on Friday, after a landmark EU ruling this week over a bank rescue, Reuters reported. On Tuesday the EU general court overturned Brussels’ decision to block a 2014 rescue plan of small Italian lender Tercas, prompting compensation calls from Italian banks which argued that subsequent banking rescues in Italy were more costly because of the Commission’s strict position.

In a related story, the International New York Times reported on a Reuters story that Italy is studying changes to the country's securitisation rules in order to help banks shed so-called 'unlikely-to-pay' (UTP) loans, a document seen by Reuters showed on Tuesday. Italian banks have drastically reduced defaulted loans on their balance sheets but for the most part they are yet to tackle UTP loans, which are not yet in default but are unlikely to be repaid in full.

Italy will renew for up to 36 months a state guarantee scheme to help banks shed bad loans, tightening rules to increase protection for some investors, a draft law decree seen by Reuters showed. The ‘GACS’ scheme allowing banks to buy a guarantee from the state on the least risky tranche in bad loan securitization sales, has proved a success in helping lenders tackle the legacy of a deep recession, Reuters reported.

The German Finance Ministry urged Italian lenders to speed up a reduction of soured loans and make more progress in cutting risk, with the warning coming as the government in Berlin pushes for a merger of the country’s struggling banking titans. “The Italian banking sector has long been faced with various structural problems, including the high level of non-performing loans,” the ministry wrote in responses to lawmakers’ questions published by the Bundestag on Thursday.

Italy is preparing a decree to renew and possibly modify a state guarantee scheme designed to help its banks shed a mountain of bad loans, two sources close to the matter said on Wednesday. The scheme, known by the acronym GACS, was introduced in 2016 and is set to expire on March 6, Reuters reported. The government now aims to launch a new programme and is in talks with European authorities, which must approve it. “The agreement has not yet been reached but we are quite close,” one of the sources said, asking not to be named.

Temporary administrators of Banca Carige said they had to find a buyer by April for the Italian bank, after unveiling a 630 million euro (£540 million) capital shortfall, Reuters reported. The European Central Bank on Jan. 2 placed Italy’s 10th largest bank under special administration - its first ever such move - after the top investor in the Genoa-based lender blocked a 400 million euro cash call.

Delta Air Lines Inc. and U.K. discounter EasyJet Plc may invest as much as 400 million euros ($452 million) total in the latest attempt to revamp struggling Italian airline Alitalia SpA, according to people familiar with an initial draft of the plan, Bloomberg News reported. Investors in a group led by rail operator Ferrovie dello Stato SpA are evaluating the financial needs of the “new Alitalia” that would emerge after the second bankruptcy process in a decade, said the people, who asked not to be named because the discussions are private.

Italy’s Salini Impregilo has offered to invest 225 million euros ($254 million) to rescue troubled rival construction group Astaldi, the company said on Thursday. Subscribing to a reserved capital increase, the proceeds of which will help Astaldi repay debt, Salini will gain a 65 percent stake, it said in a statement, Reuters reported. Salini said the offer was conditional on Astaldi reaching an accord with its creditors as well as other long-term investors contributing to the cash call and banks agreeing to grant Astaldi credit to stabilise the group’s finances and operations.