Global Banking News-August 15, 2018–Analysts worried about Italy’s threat to European banks
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Italy, whose economy is the third largest in the European Union, is said to be a growing threat to the European banking system according to some analysts, CNBC has reported.
Investors are waiting for the new budget to be presented by the coalition government and are wary of potential rises in pensions and state benefits. The nation has the second highest public debt pile in the euro zone, which is about 130 percent of gross domestic product (GDP).
An analyst said, ‘The issues in Italy… in the next three months are going to dictate the whole European banking narrative for the next three to five years.’
If market players do not approve of the next budget, due around October, then borrowing costs for Italy are likely to go up, which in turn could affect neighbouring European countries. It could also create problems for certain European banks that hold Italian debt, analysts said.
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