Italy's populist government blinks on Banca Carige
Italy's populist government made a point before taking over that they would stop giving money to banks and protect investors. But when faced with a potential bank collapse in Banca Carige that would wipe out a considerable base of depositors in the northern region (Lega leader Matteo Salvini's camp), the government has blinked and approved of state guarantees for the lender's bond issuances and even went as far as hinting at support for possible recapitalisation of their capital ratio.
The latter was used by the previous government to rescue Banca Monte dei Paschi in 2017, which was at the time condemned by the Five Star Movement party. How the tables have turned, and guess what? Nothing has really changed.
The latest news on this is by Corriere which is reporting that Italy's government is said to be ready to guarantee up to €3 billion worth of Banca Carige bonds while also looking to create a €1.3 billion "bank support fund".
Banca Carige is by no means a big national bank but a collapse would deal a major blow to the government in a region already hampered with infrastructure delays and industrial problems. Not only that, it would also create more headaches for the government as their financial standing will be called into question once again.
The only reason why this hasn't really impacted the euro is because market participants have come to know that the normal rules don't apply to Italy when it comes to rescuing banks. Although the populist government has had to go against one of their earlier promises, they couldn't afford a collapse in any case.
If you're ever wondering when is a bank bailout not considered a 'bailout' in the general sense? Well, only when it's in Italy.
