12.06.2017 - Studies

Monte dei Paschi is only the tip of the iceberg

by Agnieszka Gehringer

Monte dei Paschi has a preliminary deal to get rid of its toxic loans. This is, however, only the tip of the iceberg, given that the underlying weaknesses of the Italian economy still persist.

It is commonly agreed that the fixing of the Italian banking crisis should be accompanied by a structural policy plan for the economy as a whole. However, not much has been done yet to develop a strategy in this sense. Indeed, the strong positive correlation between the level of unemployment (which is a symptom of past weak economic performance) and the bad debt ratio in the Italian regions confirms that underlying structural problems stay on the way to fix problems in the banking sector.

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