Executive Intelligence Review


Di Maio Raises Glass-Steagall in Context of Italian Bank Carige Crisis

Jan. 10, 2019 (EIRNS)—Italian Deputy Prime Minister Luigi Di Maio raised the issue of bank separation (Glass-Steagall) in a ten-point explanation of the government decision to pre-empt a bail-in resolution for the Savings Bank of Genoa (Carige). Point 9 of the statement, which was published on Di Maio’s Facebook page, said: “We will fight in Europe to reform the system of banking supervision and we will implement a separation between commercial and investment banks.”

The weak point of this statement is that changing European law in favor of Glass-Steagall is more difficult than straightening out a dog’s legs.

The Italian government decision on Carige has provoked angry reactions from pro-EU circles. Exemplary of this faction, the German daily Handelsblatt complained in a commentary Jan. 8 that

“actually, Euro states had agreed after the financial crisis that troubled banks should be resolved instead of bailing them out with taxpayers’ money. Shareholders, creditors and wealthy depositors should then take the losses.”

Instead, “Rome is again helping a credit institution instead of resolving it.”

Back to the real world, Italy’s Minister for European Affairs Paolo Savona wrote an op-ed in the daily Il Sole 24 Ore making a general point, and blasting the EU economic and monetary policy as the real cause of the banking crisis. “No bank can stand a long period of economic crisis without a deterioration of its loans and a loss of perspectives for growth and profitability.” Savona calls the ECB “solution,” i.e. demanding a capital increase and cost cutting from banks, “unrealistic.”

“Without real growth driven by real investments we risk systemic crises,” Savona wrote. If a campaign against government debt is carried out in

“this precarious state of the environment in which banks are currently operating in Europe ... [it] undermines depositors’ confidence in what they consider to be their financial wealth and negative effects are conveyed also to the sector of bank deposits.

“Without a fiscal policy at the EU level to boost real growth, interventions by member states in support of banks and depositors are just running after the problem caused by non-[existing] structural solutions.”

A real banking union needs a lender of last resort and a single deposit insurance fund, but Savona complains that so far, he has found no will to tackle the problem among his colleagues in the EU.