In Europe, there is a lot of focus on what is going on with the Italian banks right now. A crisis seems unavoidable, and the only question is how bad things will get. Nearly US$400bn in bank loans are “non-performing”. Moreover, there is a significant struggle to offer new credit. Is this a positive sign for Bitcoin, or will the Eurozone collapse entirely?
Failure To Clean Up Italian Banks Causes Grave Concerns
Italy is not the first nor the last country to deal with a horrible banking situation. Had the country cleaned up its banking system a few years ago, some of these problems could have been averted. Alas, they did not, and nearly one in five bank loans in the country are worthless. While institutions are struggling, the households will be the ones to feel the burn.
Depending on how this situation plays out, the Italian government could be brought down. In fact, there is a possible scenario to make the entire eurozone collapse. Some experts feel this situation is far more volatile than the Brexit or the Greece debacle. Current projections estimate the Italian economy will remain on shaky legs until at least 2025.
It is certainly possible to recapitalise the Italian banks, and the amount of money required is not astronomical. However, the majority of this funds will have to come from retail customers, who are already bearing the weight of debt on their shoulders. Bailing in retail bondholders may shut down the domestic bond market altogether.
Depending on whom one poses the question to, Italy may end up defying Europe’s ruling. By coming up with their own plan to recapitalise banks without being greenlighted by the EU, Italy will be playing a very dangerous game. However, something has to happen sooner rather than later, as any further delay will only make the situation worse.
Investors and households may want to look at ways to diversify their portfolio. Every scrap of money they have set aside that is not going to paying back bank loans should be used to create more value. Bitcoin presents an option to do so, albeit it is not without risk either. Dire straits for Italy, that much is certain.
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