Italy

The Italian banking system remains vulnerable

Following a turbulent first half-year, the situation facing Italian banks has calmed down somewhat, but the problems surrounding Banca Carige have now shifted investor focus back to this sector again. The bank based in Genoa urgently requires fresh capital, but the procurement of funds was in danger of failing. With transfer guarantees having now been accepted from new shares which might not be subscribed, the capital increase scheduled to run until 6 December now appears to be „cut and dried“, but it remains to be seen whether the institution can be further restructured. Once again, it is above all the high volumes of non-performing loans (NPL) that are responsible for the banks‘ problems and the reason for their capital erosion. The entire Italian banking sector remains burdened by the weight of the poor credit quality. Italian banks continue to show a total of some EUR 300 billions worth of „sofferenze“…

New electoral law in Italy would weaken the populists

The Italian parliament is about to pass a new electoral law. In the last few days, the interim government lead by the social-democratic PD held a confidence vote to enforce new legislation on electoral reform, receiving broad support from right-wing opposition parties. All that is needed now to pass the proposed legislation is one final secret vote of confidence in the upper house and subsequent approval in the senate. The overwhelming majority of the supporting parliamentary parties in both houses of parliament is very likely to guarantee success. The reform contains the following crucial points: A good third of the representatives is elected directly by a majority ballot, while the remaining representatives are determined by proportional representation via party lists. Various parliamentary parties might still unite ahead of the election to form a majority party alliance and put forward a joint candidate for the majority election. The new electoral law…

Italy has problems

Italy is currently experiencing troubled times. Politically, the country was put back years by its failure to reform the Senate last December. And the general elections in spring 2018 see Italy at a crossroads. If the Italians again choose a government spearheaded by the Social Democrats then there is the danger of things continuing unchanged without decisive reforms. If Italy, by contrast, votes for the anti-EU “Five Star Movement” then its membership of the European Monetary Union and the European Union would be under threat. The pending election season promises to bring a fierce battle between the political camps, which could actually end in stalemate and leave the country even more politically unstable than it already is. Economically speaking, Italy lags well behind the other Euroland member states; its economic output is still below that before the crisis. Recently, the economy became slightly more vibrant, but this was due to…

Italy: Left wing of the Social Democrats breaks with Renzi

After months of disputes and threats, members of the left wing of the Social Democratic ruling party have turned their words into deeds. Last weekend, leading dissidents from the left wing of the PD broke with their old party and formed a new one, “The Progressive and Democratic Movement”. The founders of this renegade splinter group include Enrico Rossi and Roberto Speranza – both presidents of their respective regions of Tuscany and Apulia. The background to their split with the PD is their strong rejection of the leadership style of the former prime minister and (although seeking re-election) former PD secretary, Matteo Renzi. His wish for the general election to be brought forward in the hope that he could again ascend the throne of government and his departure from Social Democratic values set some left wingers in the PD against him. The split in the left wing of the party…

Italy: After Constitutional Court ruling new elections are more likely as early as in

Yesterday the Italian Constitutional Court decided that parts of the new electoral law for elections to Italy’s lower house, the Chamber of Deputies, which came into effect as recently as 2016, are invalid. The court ruled that a core element of the new electoral law, a run-off vote between the two strongest parliamentary fractions, is against the constitution. However, the rule that any party attracting at least 40% of the vote should receive a majority-building bonus is to be kept. If the latter condition is not fulfilled, then the principle of pure proportional representation applies again. Taking account the amendments, the judges of the High Court declared the electoral law as applicable as of immediately so theoretically nothing would stand in the way of early new elections. The proponents of as early a poll as possible greeted the announcement with enthusiasm. In particular, the left-wing populist Five Stars Movement (M5S)…

Italy: Assessing the effects of the labour market reform „Jobs Act“ – what has been achieved so far

Italy’s lengthy economic crisis has caused unemployment to rise noticeably in past years. Rigid labour market regulation has additionally decelerated the development of employment. Both factors prompted the Italian government to act and overhaul the labour market. Due to the rigid regulation of the Italian labour market, employees had become divided into two groups – those with permanent jobs that were virtually impossible to terminate and those with limited working contracts. The reform was adopted at the end of 2014 and implemented in stages in the first half of 2015. Essentially the labour market reform, dubbed the „Jobs Act“, focused on loosening up the previously very strong protection against dismissal rules. A new working contract model was created that was intended to act as a bridge between temporary and permanent employment. In addition to creating more flexibility, the workforce was also to be offered greater social security. The reform has…