EURO ON THE BRINK: Investors predict currency COLLAPSE as Italy ‘worry child number one’

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ONE in five investors is predicting a Eurozone breakup, a survey has revealed, amid fresh fears Italian banks could be first to be allowed to go bust.

According to the latest Sentix Euro Break-up Index data captured just before Christmas, 21.8 per cent of 933 investors questioned believe Italy could end up leaving the Eurozone as its banks struggle with a liquidity crisis.

Sentix CEO Manfred Hübner said: “Italy remains the euro-worry child number one, even before Greece.”

Last week new Italian Prime Minister New Paolo Gentiloni approved £17bn in public funds to help stabilise his country’s most fragile financial institutions.

Italian banks are giving one in five investors cause for concern over the long term impact of the Eu
Mario Draghi is trying to keep the ECB out of the banks business

Italy remains the euro-worry child number one, even before Greece

Sentix CEO Manfred Hübner

The crisis began to show cracks of earthquake proportions when the European Central Bank announced the results of the 2016 bank stress tests on July 29.

They identified Italian banks as being £307bn in the red thanks to bad loans which make up 18 per cent of total bank balance sheets. Also causing concern is their chronically poor profitability, record-low interest rates, thin capital buffers and high costs.

Since July the ECB has repeatedly dragged its heels in offering a bail out.

In January it introduced the Bank Recovery and Resolution Directive legislation to prevent another £1.36trillion taxpayer bail which it was forced to implement during the 2008 financial crisis.

Numbers of those predicting an Italian exit of the eurozone has dropped slightly from 24 per cent in November, but the dangers of the Eurozone are by no means banished.

Mr Hübner added: “The agreement in Italy to recapitalise the crippled bank Monte dei Paschi has reduced the exit probability for Italy, albeit only slightly.”

Berlin politicians including Angela Merkel are not supportive of another Greece style episode.

Jens Weidmann, president of the Bundesbank, Germany’s central bank, said in an interview with Bild newspaper that any bailout would have to be “carefully examined”.

He added: “State funds are only intended as a last resort, and that is why the bar is set high.”
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