23rd Sep 2020

Merkel rebuffs Renzi's bank plan

  • Merkel and Renzi during a meeting in Berlin, earlier this year. (Photo: Palazzo Chigi)

German chancellor Angela Merkel poured cold water on Italian prime minister Matteo Renzi’s plans to temporarily side-step EU rules on state aid in order to shore up Italy’s struggling banks.

Merkel told reporters on Wednesday (29 June) that the bloc’s recent laws offered enough leeway already.

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"We cannot renegotiate every two years the rules of the banking sector," Merkel said.

Renzi retorted that Italy wasn’t asking for a change of legislation.

“The rules have been changed once, in 2003, to allow France and Germany to exceed the 3 percent ceiling,” he said.

He said the Italian government at that time had allowed the rule change as a “favour to the countries” involved, but Italy had always respected the rules.

Rome has been talking to the European Commission on ways to support its banks, which are struggling under the weight of €360 billion in bad loans, slow economic growth and record-low interest rates.

The financial turmoil that followed Britain's vote to leave the EU only added to their trouble.

Claiming that its banks, in the current situation, pose a systemic risk to the eurozone, Rome sought permission to side step EU state-aid rules for six months.

Renzi wanted to inject up to €40 billion without forcing losses on shareholders and creditors.

But Berlin is not keen on Italy's argument that Brexit represents “exceptional circumstances”.

A €45bn headache for Italy

Italian banks stricken by massive amounts of bad loans and falling shares are becoming a financial and political problem for PM Matteo Renzi and for the EU.

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