Italy Economy Real Time Data Charts

Edward Hugh is only able to update this blog from time to time, but he does run a lively Twitter account with plenty of Italy related comment. He also maintains a collection of constantly updated Italy economy charts together with short text updates on a Storify dedicated page Italy - Lost in Stagnation?


Saturday, October 18, 2008

Colonialism Goes Into Reverse Gear As The Libyan Government Bails Out Unicredit

Taking my cue from the worthy and well thumbed play-book of the Brothers Coen, I thought every now and again I might follow up all those, long, desperately serious, and highly indigestible posts about how Italy should now be considered to be "No Country For Old Men", with something in rather lighter vein.

The highly acclaimed and award winning Miss Iceland Look-alike show is not the only prime time TV talent contest we are going to see over the coming weeks and months it seems. We are also apparently on the verge of watching a beefed up and much more macho version, whose pilot screenings have now been launched under the working "Man-City/Emirates Stadium" look-alike title, since news today informs us that the Libyan government is at this very moment in the process of bailing out Italy's much troubled banking system (following in the well trodden footsteps of AC Milan, who were, it seems, able to partially finance the acquisition of the the world's former number one footballer - Ronaldinho Gaucho - thanks to a fundraising trip to the Arab Emirates).

UniCredit SpA surged after Libyan investors including its central bank boosted their stake in Italy's biggest bank and said they will invest more. The shares gained as much as 12 percent to 2.42 euros in Milan, valuing the bank at 32.2 billion euros ($42.4 billion). Libya's investment is ``good,'' UniCredit Chief Executive Officer Alessandro Profumo told reporters in Milan. ``It's a confirmation of their interest in our company, which they also consider to be very attractive.''

The investment may be worth much as 1.3 billion euros, according to a note by Centrosim analyst Marco Sallustio published this morning. It could allow Libya to obtain a seat on the bank's board. Central Bank of Libya, Libyan Investment Authority and Libyan Foreign Bank bought shares to boost their holding to 4.2 percent, the investors said in a statement late yesterday. They intend to buy as much as 500 million euros of securities that UniCredit plans to sell over coming months.


But then, where do you imagine that the greatest risk to the viability of Italy's Unicredit lies? And what do think is the the principal reason why both Italy and its banking system need this sudden Libyan support? Well you might try looking "over there", you know, where they are holding the Miss Iceland look-alike contest.

Here, courtesy of Reuters, are some basic facts about Unicredit:

- - UniCredit is one of Europe's top 10 banks by market value, with a capitalisation of about $39 billion. It is second to Intesa Sanpaolo SpA among Italian banks.

-- In a U-turn on Oct. 5 it announced plans to boost capital by 6.6 billion euros. It will ask investors for 3 billion euros in a capital increase and offer shares rather than a cash payout on 2008 results, putting 3.6 billion euros instead in its own coffers.

-- UniCredit on the same day boosted its target for Core Tier I to 6.7 percent at the end of 2008 based on Basel II requirements from its previous aim of 6.2 percent. The figure was 5.7 percent at the end of June.

-- It also slashed earnings per share forecasts for this year to 39 euro cents from around 52 euro cents previously.

-- It is the Italian bank with the most foreign exposure. UniCredit gets about half its revenue from outside Italy and its conservative lending market.

-- UniCredit, whose units include Germany's HVB, is among market leaders in Germany and Austria.

-- UniCredit's share price has dropped about 62 percent since the start of the year, pushing it second to Intesa Sanpaolo among Italian banks. The DJ Stoxx European banks index has lost about 52 percent.

-- First-half net profit was 2.9 billion euros on operating income of 14 billion euros. Deposits from customers and debt securities totalled 639.8 billion euros.

-- The bank traces its origins back to 15th century Bologna. The current UniCredit resulted from the merger of nine of Italy's biggest banks in 1998, as well as the purchase of HVB in 2005 and Italy's Capitalia last year.

-- The biggest shareholder is the Fondazione Cassa di Risparmio di Verona Vicenza Belluno e Ancona, at 5 percent.

-- Libya now comes second with its combined 4.23 percent, followed by:

Fondazione Cassa di Risparmio di Torino with 3.83 percent

Carimonte Holding with 3.35 percent

Gruppo Allianz with 2.37 percent

Fondi Barclays Global Investors UK Holdings Ltd with 2.01 percent.

-- UniCredit is the biggest shareholder in powerful investment bank Mediobanca SpA with an 8.7 percent stake.


Evidently, in this type of business, what you pay for is what you get:


Italian Prime Minister Silvio Berlusconi pledged $5 billion over 25 years to Libyan leader Muammar Qaddafi in compensation for the occupation of the country in the 30 years before World War II.

Italy will pay $200 million per year to Libya in the form of investments in infrastructure. The money will finance the construction of a coastline highway that runs about 1,600 kilometers (994 miles) between the Egyptian and Tunisian borders.

``It's a full moral recognition of the damage done to Libya during Italy's colonial period,'' Berlusconi said after arriving at the airport in the Libyan city of Benghazi, where the two leaders met to sign the accord. ``This will end 40 years of misunderstandings.''


And why, we might ask ourselves, does the Italian government find itself in need of such recourse to what we might now term "the Libyan Connection" in order to recapitalise its banks. Well, Global Insight in a very informative recent survey of the recently adopted EU government commitments to the banking sector perhaps offer us one part of the explanation: quite simply, after years of letting the public finances drift, Italy simply doesn't have any borrowing capacity left with which to raise the necessary money itself, since with debt at around 104% of GDP, people - apart from those ever so kind Libyans that is - have become increasingly reluctant to lend it to them.

In a deviation from the measures seen in France and Germany, Italy has not created a fund for its rescue plan, with Finance Minister Giulio Tremonti stating that, "As of today, we estimate that it's not necessary to have a predetermined figure."......Italy is in stark contrast to other European nations by providing no firm capital commitments; however, the government's reluctance to create a rescue fund could partly be a reflection of the restraints imposed by its substantial public debt, which stood at 104% of GDP in 2007.


So, as I said, with people becoming increasingly apprehensive about buying Italian government paper, then having rich and obliging friends like the Libyan government is going to be a real boon. Oh yes, but of course when I said "people" in the last sentence, I wasn't, of course, including, at least for the moment, that other untiring friend and trusted workhorse the Italian government can still count on for support over at the ECB in Frankfurt.

The Bank of Italy will also engage in a 40-billion-euro debt swap, taking on inferior bank debt for government bonds that can then be used to obtain financing from the ECB.


So don't let yourself get behind the curve, and don't miss out on the very latest talent-stalking trend towards ever more exotic varieties of global look-alike contests. Now which country was it where the banks were being busily underwritten by the Shanghai Pudong Development Bank, just let me go and check my records......?

2 comments:

Piazza Armerina said...

You know what is funny? Those of us who have left can see the situation much clearer from the outside, because we care about Italy, and we want to understand - so we try to do our homework on the subject. Plus, having the experience of living and working in other countries helps us with putting many of Italy's problems in perspective. The USA is not perfect by any means, but at least in the US there is some sort of sense of personal responsibility, even though many leave it on the table for others to profit from. Nevertheless, it's still there. In Italy, they expect others to solve their problems.

But many of those who choose to stay in Italy often have a simplistic view. They enjoy to make fun of those Americans who live between the coasts (Middle-America) as being backwards, ignorant, puritan, racist, etc. Yet, when you talk to them about Italy's problems they seem to behave very similarly to rednecks - even the puritan part can be compared to a disturbing Virgin Mary theme in Italy.

The fact of the matter is 8 out of 10 times, when Italians talk privately about their perpetual recession, they blame it all on the immigrants. "The immigrants bring the whole country down". Of course they are cynical of the government, and of course they see many Italians with decent jobs that were obtained through family connections and they are very envious. But they also expect everyone else to solve the problems. Their hands are tied! Some of those without family connections actually delude themselves into thinking they are on a level playing field, and sometimes they defend the rich as being a lesser of 2 evils (immigrants being the most evil).

Plus, they are also guilty of not taking intellectual responsibility for themselves in order to arrive at a well-thought-out informed opinion of their economic situation. Most cannot tell the difference between classical and keynesian economics!

I am not sure there is a huge difference between parochial America and Italy - other then the fact that one probably makes better love, eats better food, and refrains from playing with guns. But for the rest ... the same song.

Anonymous said...

Piazza Armerina tou are 100% right.
And thanks to the blogs of Beppe Grillo nad Marco Travaglio we get the real news on what happens in Italy. because the real info down there is controlled by the mafia state