Despite – or perhaps due to – Italy’s failed attempt to slide a state-funded €40 billion recapitalization attempt past Angela Merkel while blaming it on Brexit, and coupled with a bailout proposal to provide €150 billion in liquidity to insolvent banks, overnight we got yet another confirmation that the biggest risk factor for Europe is not Brexit but Italy, where yet another failed bank was bailed out. As the FT reports overnight, Atlante, Italy’s privately backed €5bn bank bailout fund which was created in April to stem the threat of contagion from struggling lenders and whose assets turned out to be woefully inadequate, took control of Veneto Banca after a €1bn capital increase demanded by EU bank regulators attracted zero interest.
This is good news for Veneto Banco and bad news for all other insolvent banks, because the fund, known as Atlas in English, was intended to hold up the sky for Italian banks. Instead it is now practically out of funds, having depleted more than half of its war chest after taking control of Popolare di Vicenza, another regional bank, last month.
Fitch Ratings has cut its credit grade for the European fund that provides rescue loans to Greece, Ireland and Portugal.
The agency says it lowered the rating for the European Financial Stability Facility – or EFSF- by one notch from AAA to AA+ as a result of its downgrade of France last week. The EFSF’s creditworthiness depends on that of the countries that provide its financing, which includes France. Continue reading