The Italian tax payer will likely rescue Italy’s third largest lender, Monte dei Paschi, by the end of next week, with the rescue funds to be used to prop up other banks as well. Earlier, Monte dei Paschi revealed that it could run out of funds by next April, using up nearly €11bn (£9.2bn). Previously it had said it had the funds to stay afloat for 11 months and also added that by next May, it could burn through even more – €15bn (£12.6bn) in total. The bank suspended trading in its shares at one stage on Wednesday, when they fell again to their lowest level since the bank’s stock market flotation in 1999.
Monte dei Paschi failed a European Union stress test in July because it has billions of euros of risky loans on its books, made to clients who cannot afford to repay them. It has been trying to raise €5bn (£4.2bn) in fresh capital by the end of the month to stage its own rescue, but so far it has raised only €500m (£420m). If the bank cannot arrange a successful private sector bailout, the Italian government will probably step in.
The new Italian Prime Minister, Paolo Gentiloni, has vowed not to let the bank fail, for fear that its collapse could topple the rest of Italy’s heavily indebted banking sector, failure of the bank would threaten the savings of thousands of Italian citizens.
The funds for the government bailout have already been approved by both the lower and upper houses of the Italian parliament. The parliamentary measure said that the government could borrow the required money to provide “an adequate level of liquidity into the banking system” and that the government could support a lender’s finances by “underwriting new shares”.
Government borrowing fell in November to £12.6bn, down £0.6bn from November 2015. However, the fall was less than analysts had been expecting. The monthly borrowing figure had been expected to shrink to £11.6bn, according to an economists’ poll. Borrowing for the financial year so far is down on last year. From April to November, borrowing, excluding state-owned banks, fell by £7.7bn to £59.5bn.
Despite the smaller-than-expected fall in November’s borrowing figure, economists said the government was on track to meet its less ambitious deficit forecast set out in November’s Autumn Statement.
The public finances in October were unexpectedly healthy – with the government having to borrow less than expected. In November that went into reverse. While government spending is growing, tax receipts from VAT and income tax are growing faster.
British consumers have ended the year on a positive note, with confidence rising despite gloomy forecasts for the economy. Consumer confidence increased in December by one point, pushed higher by a positive attitude towards making major purchases such as furniture and white goods.
UK consumers were feeling better about their personal financial situation over the next year, with morale rising by a point and the major purchase index rising by seven points. The likelihood of UK consumers saving also increased markedly, with a six-point rise in the last month to minus five.
13.30 – USD –Core Durable Good Orders MoM; Forecast at 0.2% against a previous of 0.8%
13.30 – USD – Final GDP QoQ; Forecast at 3.3% against a previous of 3.2%
13.30 – USD – Unemployment Claims; Forecast at 225K against a previous of 254K
Report courtesy of RationalFX