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Italy’s teetering banks will be Europe’s next crisis

economist.com

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Re: Italy’s teetering banks will be Europe’s next crisis

#61

Post by izacus »

antr wrote: post #31
guelo wrote: post #24

It’s easy for Merkel to insist that Italy has to strictly follow EU rules since she doesn’t have to win an Italian election. The Euro just seems like a complete failure. Giant economies are limping along with 20% unemployment, unable to recover 8 years after the recession. In contrast the US has managed an OK recovery, now closing in on full employment. The problem is that each EU national leader is accountable only…

What does Merkel got to do with bad risk management and lax lending criteria by Italian banks? I struggle to find a link between your comment and the article.

Because now Euro doesn't let them tank their own economy by devaluating currency to hide the corruption.

Re: Italy’s teetering banks will be Europe’s next crisis

#62

Post by netcan »

guelo wrote: post #24

It’s easy for Merkel to insist that Italy has to strictly follow EU rules since she doesn’t have to win an Italian election. The Euro just seems like a complete failure. Giant economies are limping along with 20% unemployment, unable to recover 8 years after the recession. In contrast the US has managed an OK recovery, now closing in on full employment. The problem is that each EU national leader is accountable only…

I'm not strongly opinionated on what's wrong with the euro currency, but this is a pretty major issue with the EU generally. There isn't a coherent democratic polity, it's being governed like a trade agreement while acting like much more.

I think Brexit highlighted this big hole. Who spoke for the EU? You'd occasionally see a headshot with a "EU President" title attached to it, which would then be dismissed in favour of the opinion of Merkel or Hollande who didn't even notionally represent the Brttish in any way.

If the EU is to govern so much, it needs a polity that Europeans jointly elect, with representatives that genuinely represent the EU, not local interests. The EU needs a face, parties with cross-border support, democracy, mandate... Even the UN has more of this than the EU. At least it has a face representing it.

I'm not sure this leads to better monetary policy (I don't really believe we confidently know what better monetary policy is), but I do think it's necessary if the EU is going to govern so much.

Re: Italy’s teetering banks will be Europe’s next crisis

#63

Post by sievebrain »

vidarh wrote: post #49
pjmlp wrote: post #33

Earlier quoted context omitted.

As a foreign living in Germany I do appreciate the mentality that things "should be done the correct way", but many here don't understand you cannot just change a country's culture by forcing them to strictly follow EU rules. As it has already been proven by the lumping economies in the southern Europe, people will suffer and everyone will just make use of black market for jobs and goods to survive at any cost or jus…

> Assuming the Brexit works for the UK, I am just waiting to see who's next. Given that the indications so far is that the Brexit vote has made attitudes towards the EU far more positive so far, it'd need to be amazingly successful for the UK for anyone else to leave at this point, and I don't anyone here that don't expect it to be a massively painful experience, even if they voted to leave.

The current poll shifts don't show an increase in 'positivity', they show a decline in people wanting to leave the EU. That's not quite the same thing.

Re: Italy’s teetering banks will be Europe’s next crisis

#64

Post by blahi »

Dylan16807 wrote: post #36
blahi wrote: post #25

Earlier quoted context omitted.

The world's population in the 1900 was 1,5B people. By 1970, it was twice that. By the year 2000, it was twice that again! And by 2050 it will be 9B. Where does the money for all those people would come from if not from borrowing (money from the future)?

You can just print more money in proportion to population growth. While keeping a stable minimum reserve percent.

The rich people will be less rich in that situation. They are in a similar situation now with the current inflation, but growth of money has to be tied to economic growth or otherwise the rich will feel screwed.

I'm not saying it's good, but you cannot screw the rich. The current situation is a compromise and a very sensible at that I might add, despite all the noise from tin-foil hatters.

There are also other, practical consideration which will make what you are proposing impossible to put in practice for a prolong period of time.

Re: Italy’s teetering banks will be Europe’s next crisis

#65

Post by bonzini »

fibo wrote: post #45

the big problem in Italy are taxes, I pay 38%, but for more than 55k you pay 41%, how politicians pretend Italy can survive? In Switzerland you pay 16%.

38% is the marginal rate; that is, if you earn less than 55k you aren't paying 38%, you pay 38% on income between 28k and 55k. If you do the math, you are paying somewhere between 25% and 31%, probably less because of various returns that you get ("detrazioni").

In fact the actual % is around 35% on 75k euro income, and it doesn't reach 41% until around 200k euro (where the marginal rate is 43%).

In the US, if you earned $50k you'd have a federal income tax around 15%, plus a state income tax (around 5% for California), plus possibly a municipal income tax (around 3% for New York City for example). We're already at 23% and you're getting much worse healthcare than in Italy (even assuming your employer is paying for it, which is not a given) and hardly any retirement plan.

If you're employed the problem is that Italian wages are low (especially in IT), not that taxes are high. Really, taxes in Italy are only high for self-employed people.

Re: Italy’s teetering banks will be Europe’s next crisis

#66

Post by sievebrain »

vidarh wrote: post #56
Hermel wrote: post #27

Earlier quoted context omitted.

It would already help a lot if the European commission was democratically elected and if the European parliament was given the power to make laws. (It sounds like a joke, but the European parliament cannot propose new laws - even though that's the usual purpose of a parliament. It is the commission that proposes new laws in the EU.)

For that to happen, Europe would need to go federal. You can't have a legislative parliament in the current system because it'd violate the constitutions of a large proportion of the member states to delegate sovereignty somewhere else. This is the big challenge. People complain about the lack of powers for the EU Parliament, but largely aren't willing to support a model that'd make it possible. This is also why the…

This sort of argument is merely playing with words and has no intellectual merit.

The EU's directives MUST be passed into law due to the treaties involved. A country cannot simply refuse to implement directives it does not agree with, without also leaving the EU. Failure to obey the rules is met with fines and other forms of punishment.

Whilst a handful of lawyers may pretend this is not a transfer of sovereignty, nobody else does, not even Juncker.

Re: Italy’s teetering banks will be Europe’s next crisis

#67

Post by vidarh »

fibo wrote: post #45

the big problem in Italy are taxes, I pay 38%, but for more than 55k you pay 41%, how politicians pretend Italy can survive? In Switzerland you pay 16%.

Do you actually pay 38% or is that the marginal tax bands?

Because according to this [1] HSBC advice, these were the tax bands in force from 2013:

2013 National Income Tax Rates Taxable Income Band € National Income Tax Rates

    1 – 15,000 23%
    15,001 – 28,000 27%
    28,001 – 55,000 38%
    55,001 – 75,000 41%
    75,001 + 43%
... and they do not mean you pay 38% if you're below 55,000. With the tax bands above, you'd pay ~32% if you earn 55,000

That does in fact place Italy quite high, but OECD ranks Italy below Belgium, Austria, Germany and Hungary in overall tax wedge amongst OECD countries [2] (note that if the numbers look surprising, it is because the OECD is ranking based on total tax wedge including employers social security payments, which often seems weird if you're used to comparing based on the contracted salary - these tax rates are not the percentage paid on the salary in your employment contract, but by the sum of your salary and the employers contributions). Looking only at the actual income tax, it'd rank much lower - it's not a particularly high income tax level relative to the average income.

Switzerland is low in proportion in large part because its overall income levels are very high, and it's income from other sources is very high.

The bigger problem in Italy seems to me to be that you have on of the least progressive income systems I've seen, so low earners gets hit particularly hard.

[1] http://www.expat.hsbc.com/1/PA_ES_Content_Mgmt/content/hsbc_...

[2] http://www.keepeek.com/Digital-Asset-Management/oecd/taxatio...

Re: Italy’s teetering banks will be Europe’s next crisis

#68

Post by sievebrain »

glenndebacker wrote: post #42
guelo wrote: post #24

It’s easy for Merkel to insist that Italy has to strictly follow EU rules since she doesn’t have to win an Italian election. The Euro just seems like a complete failure. Giant economies are limping along with 20% unemployment, unable to recover 8 years after the recession. In contrast the US has managed an OK recovery, now closing in on full employment. The problem is that each EU national leader is accountable only…

"The Euro just seems like a complete failure. Giant economies are limping along with 20% unemployment, unable to recover 8 years after the recession. In contrast the US has managed an OK recovery, now closing in on full employment." You are aware that the problem with the EU banking reforms (or lack off) was also that the UK didn't wanted stricter rules with regards of the city of London... ? They even wanted an exem…

There is no intellectual dishonesty. Fixing the Eurozone's banking problems (assuming you believe those regulations would do the trick) is not the UK's problem and it's not the UK that blindly insists on a one-track, one-speed Europe: it's Germany and France that are wedded to that concept. They could easily have introduced new rules only in the countries that wanted them.

But regardless, the problem in Italy is simply that not enough people are paying back their loans. That's not something bank regulation is going to fix. Banks make loans, that's kind of what they do, and if a country collectively gets too bad at paying back those loans then it's gonna have a banking crisis.

Re: Italy’s teetering banks will be Europe’s next crisis

#69

Post by vkou »

bonzini wrote: post #65
fibo wrote: post #45

the big problem in Italy are taxes, I pay 38%, but for more than 55k you pay 41%, how politicians pretend Italy can survive? In Switzerland you pay 16%.

38% is the marginal rate; that is, if you earn less than 55k you aren't paying 38%, you pay 38% on income between 28k and 55k. If you do the math, you are paying somewhere between 25% and 31%, probably less because of various returns that you get ("detrazioni"). In fact the actual % is around 35% on 75k euro income, and it doesn't reach 41% until around 200k euro (where the marginal rate is 43%). In the US, if you ea…

In the US, you also forgot federal social security tax, (7.65% * 2), Medicare tax (~3%)... And hey, looks like your tax bill just hit 35%. Oh, and feel free to drop another ~$3-10,000 on healthcare.

Re: Italy’s teetering banks will be Europe’s next crisis

#70

Post by vidarh »

znpy wrote: post #60
ktRolster wrote: post #47

Earlier quoted context omitted.

How can Switzerland survive on 16%? That is my question.

It's easy: every one is paying that 16%. Taxes can be low if everyone (no matter their size, big or small) pay them.

More realistically it is because average income in Switzerland is about 2.5 times as high as in Italy. A 16% tax rate across the board in Switzerland is comparable to an across the board 40% tax rate in Italy, which is relatively in line with the actual tax rates in Italy, especially when considering that an overall poorer population may also result in substantially higher welfare costs.
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