EURO BANKING CRISIS : ADMINISTRATIVE COURT IN ROME HOLDS NEW HEARING ON MONTE DEI PASCHI DI SIENA.



EURO BANKING CRISIS : ADMINISTRATIVE COURT IN ROME HOLDS NEW HEARING ON MONTE DEI PASCHI DI SIENA.

The Administrative Court in the Lazio region of Italy is reading itself for a new hearing for the challenge brought by a consumer group to the proposal of a bailout for the ailing banking institution Monte dei Paschi di Siena.

The Institution, the oldest bank in the world of its nature, has been beset by woes since the middle of January when it was forced to restate its balances after a Bloomberg report that pointed to a mismanagement of the banking institution, which was using derivatives to conceal losses.

The Euro zone banks have been beset by financial losses ever since the 2008 economic crisis hit, and many of the EU countries have had their banking sector shaken by the news that that many of them faced staggering losses due to heavy investments in derivatives tied to the US housing market.  

Just today the Dutch government has announced the nationalization of one of its largest bank, SNS Reeal, after it failed to perform and meet solvency limits.  Although the bank is not insolvent, it was seeking private investment to shore up its finances.  

Also today, Credit Agricole in France has announced that it will have to restate losses to the tune of 2.8 billion dollars. 

This latest hearthquake in the Italian financial sector does not bode well.  In general, the Monti government has tried to solve its financial shortfalls by implimenting a policy that has shifted the burden of taxation to the citizens, while at the same time seeking to make good on a promise to curtail tax evasion, among other things.  However, it seems that the way the tax-evasion enforcement is taking place, alongside a slew of new and creative taxes on the Italian people,  is through a mechanized system of checks and balances in which the private habits of citizens will be scrutinized to ascertain whether the subjects of investigation are living a lifestyle that does not match the declared income levels.

The Monti program, after all, was designed to reduce national debt and eliminate the need for a bailout from abroad.  Such bailout would have required an 'opening of the books', something that in the secretive and labyrinthine political and financial system of Italy,  could very well bring to light both the degree of financial distress of the country, but also the many 'off the books' alliances that exist between the financial and political structures.

Nearing an election such shakeup in the banking sector has ignited a furor of apprehension not felt before.  Many local jurisdictions have already filed independent investigation into the banking practices of MPS and its alleged ties to political figures and contributions made to political campaigns. 

MPS is also seeking a bailout, from the government, under the so called Monti plan, which would allow the bank to seek to sell securities at the staggering rate of 9% variable rate, which could rise as high as 15%.

Sources: Bloomberg 2.2.13/BBC News 2.2.13

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