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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

#71

Post by vkou »

wsc981 wrote: post #29
sremani wrote: post #5

Earlier quoted context omitted.

I really do not have context about Italy and Economist, but this issue has been predicted and talked about by others. Here is one of them. https://geopoliticalfutures.com/italy-and-systemic-failure/

I fear the EU will use the (huge) Dutch pension funds to bail out Italy. Just last week the Dutch parliament hurriedly accepted EU regulations that allow the Dutch pension funds to move to other EU countries, which would put them out of scope of Dutch (strict) regulation and could possibly be used in the future by the EU to bail out countries like Italy. One way to achieve this would be by requiring a certain percent…

If these pension funds are throwing large amounts of money into a dangerous market, that would solely be the fault of Dutch pension fund managers. There are plenty of other non-Dutch instruments they can, and should be investing in.

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

#72

Post by bonzini »

vidarh wrote: post #67
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 y…

> 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.

There are other mechanisms to make things more progressive. These include special regimes for low income self-employed people and extra returns keyed on stuff such as children (which progressively reduce and finally disappear as your income grows). You end up not paying taxes at all unless you earn at least ~8,000 euros. On a 30k euro income (about average for a secretary with 10 years experience) the overall final rate is around 23-24%.

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

#73

Post by charlesdm »

pille wrote: post #51
charlesdm wrote: post #34

Earlier quoted context omitted.

As often with things in life, is there really a correct way? I mean, yes, there are laws saying banks cannot receive state aid, but they were only introduced recently. Does that really mean we should let a massive bank (or multiple banks) go bankrupt? Given the global financial system is so interconnected, only a fool would think this would have no impact to the german economy. I don't mind rules, but every rule is m…

> there are laws saying banks cannot receive state aid > every rule is meant to be broken if the situation warrants it Why did anyone bother with the rule in the first place then? Wasn't this exactly the kind of situation it was supposed to cover? It's not like an Italian financial crisis was off the radar when this rule got written. > Does that really mean we should let a massive bank (or multiple banks) go bankrupt…

1. What works for (relatively) small Cypriot banks will probably not work for larger system banks. The bail in rules worked well in part because the Cypriot banks held a lot of foreign, Russian deposits. If Deutsche goes bust.. winter is coming.

2. Bankruptcy will lead to local deposit funds having to reimburse €100,000 per person, per bank. Which will ultimately be paid for by the taxpayer. It might actually be cheaper for the taxpayer to just save the bank.

At least in Belgium, the government actually got quite a good return on the emergency funds they lent to the banks during the financial crisis. So we're looking at a possible return vs a certain loss.

I'm not saying all banks need to be bailed out, but it's only prudent to keep the option on the table if required. The world would be a different place if post Lehman governments would have let banks collapse.

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

#74

Post by visarga »

sievebrain wrote: post #68
glenndebacker wrote: post #42

Earlier quoted context omitted.

"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 simp…

> Banks make loans, that's kind of what they do,

How naive. Banks have to take collateral and give loans only to people/companies that have good track record. What they did is to give loans to people who could not pay back, which is a fatal mistake for a bank.

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

#75

Post by bonzini »

vkou wrote: post #69
bonzini wrote: post #65

Earlier quoted context omitted.

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.

I didn't forget them, I didn't know about them and I was sure that someone would fix it for me. :)

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

#76

Post by mattmanser »

netcan wrote: post #62
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…

There was one point where the EU commission president stuck his fingers in his ears and walked away when being asked about Brexit by journalists.

That would be career suicide for a politician, but not for EU bureaucrats.

That's the sort of contempt they hold for the populace of the EU, they couldn't care at all.

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

#77

Post by throwaway991132 »

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…

So what you are saying, is that the problems in Greece are down to the UK? I think you may want to rethink how you perceive your world.

The UK has nothing to do with reforms concerning the EURO. That's up to France and Germany and the EU Central Bank.

The biggest problem is this. The UK is now leaving and taking a pretty big economy with it. Those payments the UK makes is going too.

The Germany Economy can't keep bailing out the poorer nations in the EU alone.

The market is now eyeing up all the banks in the EU countries and are sharpening their knives to do shortages.

I'm just waiting for 1 bank to need a bailout and then you'll see a long list.

Who is going to foot this bill, France, Germany, Finland? What conditions are they going to impose.

Is Italy or another country (Spain?) going to see Greece style sanctions?

Once this happens, I think you'll start to see other exit musings in other countries and it'll be the beginning of the end!

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

#78

Post by visarga »

netcan wrote: post #62
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…

Direct voting, like the UK referendum, can lead to impossible situations. People vote for what they wished was the reality, and many times it's just not possible.

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

#79

Post by velodrome »

basicplus2 wrote: post #26

EU now requires all member nations to enforce bail-in so ordinary depositors carry same risk as creditors of banks. America - Gone EU - Gone Canada - Gone New Zealand - Gone Australia - nearly gone - Turnbull was head of Goldman Sachs in Australia. All thanks to Goldman Sachs etc http://cecaust.com.au/releases/2014_03_20_Treasury_Bail_In.h... http://cecaust.com.au/releases/2015_11_27_G20_Accepts_Bailin... http://ceca…

It is because of the revolving door problem:

The movement of personnel between roles as legislators and regulators and the industries affected by the legislation and regulation

https://en.wikipedia.org/wiki/Revolving_door_(politics)

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

#80

Post by lultimouomo »

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…

What you're saying is basically true, but to make a fair comparison you need to consider that in Italy as well you need to add municipal and regional tax (which together are probably around 1%) and particularly that you do pay for you mandatory retirement plan - not with your taxes, but with an additional mandatory withholding that goes from 25% to 35%; plus your employer has a 5% tax on its "profits", but said profits don't consider expenses for your wage, so it's effectively a 5% tax on your wage (this is of course in addition to the regular 26% tax on company profits, from which you can discount employee wages as expenses).

My impression is that the whole system is willingly structured in an overly complicated way, with taxes split between several payers and several taxable bases, so that you cannot know how much of your income are paying.

Also, the taxation is really similar between employees and self-employed workers; it's just that the latter have a marginally better grasp on how much they're paying.

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