Italy

Italy faces a deep crisis as its biggest steel plants struggle for survival, putting it in the forefront of a permanent decline in western Europe's steel sector and increasing cost pressures on many of the region's industries, Reuters reported. Producing crude steel in the European Union, where supply is 30 percent more than demand, has become too costly. Only the most technologically and environmentally advanced plants are set to survive. Italy's largest steel producers, ILVA and Lucchini, face potential shutdowns, which could cost the country 25,000 to 30,000 direct and indirect jobs.

The board of Banca Monte dei Paschi di Siena SpA on Wednesday approved the bank's request for more government funds than planned, which will likely lead to the government taking a larger stake in the Italian bank, The Wall Street Journal reported. The bank will issue €3.9 billion ($5.05 billion)—about €500 million more than originally planned—in bonds that the government will underwrite, with the condition that the coupon attached to them will be converted into shares if the bank ends the year with a net loss.

The 40,000-person town of Sciacca has become a mausoleum of decades-old unfinished public works. Rainwater and weeds fill the basins of two indoor Olympic-scale swimming pools that have never opened, The Wall Street Journal reported. The cement carcass of a retirement home, overlooking Sciacca's port, remains bereft of tenants, or electricity, decades after its construction. "Our model for economic growth is not one based on balanced budgets," said longtime Sciacca resident Calogero Mannino, 73 years old, one of the town's principal rainmakers.

Prime Minister Mario Monti announced a tax cut for low-income earners, a surprise move to reward Italians after months of austerity measures that have damped recovery prospects in the euro-zone's third-largest economy, The Wall Street Journal reported. Though the measures also include a billions of euros of cuts in public spending, Italy's technocratic government billed the income-tax reduction as proof that a year of sacrifices aimed at staving off the prospect of default for the country's indebted state is paying off.

Deiulemar Shipping, a major Italian dry freight group, has been declared bankrupt owing more than 500 million euros, an Italian court and the company said on Wednesday, the latest casualty of a worsening freight market crisis. The slump, one of the worst ever faced by the sector, has sunk a number of dry bulk firms including Britain's oldest, Stephenson Clarke Shipping Ltd. "Deiulemar Shipping was declared bankrupt by the court of Torre Annunziata this week," said Astolfo Di Amato, the lawyer representing Deiulemar Shipping.

Prime Minister Mario Monti may have saved Italy from ruinous default but the growth potential of Europe's most sluggish economy is as weak as ever, and that means prospects for lasting debt reduction remain fragile, Reuters reported in an analysis. Thanks to his decisive austerity measures and personal credibility, the economist and former European commissioner has put Italy back at the centre of European decision making and helped to lower its borrowing costs.

UniCredit has asked a court to start insolvency proceedings for loss-making Italian investment company Sopaf, judicial sources said on Wednesday, Reuters reported. Sopaf, which first failed to pay back debt last November and has net debt of around 100 million euros ($129 million), said in a statement on Wednesday it had received no official notice about the insolvency proceedings request.

Investors in about 5 billion euros ($6.3 billion) of Banca Monte dei Paschi di Siena SpA’s junior debt face a more than even-money chance of suffering losses as bad loans pile up at the world’s oldest bank, Bloomberg Businessweek reported. The cost of insuring 10 million euros of the lender’s subordinated debt is 2.75 million euros in advance and 500,000 euros a year, signaling an almost 60 percent probability of default, according to data provider CMA. That’s up from 1.7 million euros upfront on Jan.

Some Italian banks are prodding the Bank of Italy to let them revalue at current prices the stakes they have owned in the central bank for nearly 80 years, The Wall Street Journal reported. The move is aimed at bolstering the balance sheets of Italy's banks and was proposed in recent weeks by individual banks and an industry group. So far, the Bank of Italy has given no indication that it will agree to the revaluation, but proponents gained some optimism when the central bank said it is open to discussions on how to change its unusual ownership structure.

During an all-night European summit in June, Mario Monti, the Italian Prime Minister, gave German Chancellor Angela Merkel an unexpected ultimatum: He would block all deals until she agreed to take action against Italy's and Spain's rising borrowing costs, The Wall Street Journal reported. Ms. Merkel, who has held most of the euro's cards for the past two years, wasn't used to being put on the defensive. "This is not helpful, Mario," Ms. Merkel warned, according to people present.