Italy and the Banking Union in the Post-Crisis Period
Abstract
Italy is an essential element of the European economic integration and the third largest economy in the EU. Close relations between the country's unstable banking sector and financial institutions in other European states carries the risk of contagion in case of a financial crisis. In this regard, the prevention of Italian banks' collapse has become an urgent task for all the eurozone members. The purpose of the article is to analyze the effectiveness of the application of the general rules for resolving banking crises in the eurozone introduced by the Banking Union, using the Italian case. The emphasis is put on the peculiarities of the Italian leadership applying the new principle of settlement of bank liquidity problems — bailin. This mechanism was originally designed to minimize the state recapitalization of banks as a measure of overcoming the consequences of financial crises, and, therefore, shift the burden of responsibility for "saving" banks from taxpayers to the financial sector. The article analyzes how the Italian government has continued to provide support to national banks at the expense of the budget since 2016, taking advantage of the ambiguity of the Banking Union rules. The impact of such precedent on other Eurozone countries is underlined, as they may also act in circumvention of the established procedures. The author states that the current global situation with the coronavirus pandemic has once again put the banking sector of the eurozone countries and, in particular, Italy, in a critical situation. Now the anti-crisis measures taken at the national and supranational levels can become decisive in determining the future of the EU as an interstate association. As a conclusion, the author suggests one of the possible solutions to the problem — modification of the Banking Union rules through a clearer and unambiguous formulation of key concepts in its legal framework, which would remove obstacles to the further integration process.
Keywords
European integration, financial integration, eurozone, Italy, banking system, Banking Union
Author
Alyona Shmalko
Made on
Tilda