EU: Follow the rules on banks, EU tells Italy, Brexit no excuse

Germany and the European Commission told Italy on Wednesday to follow the rules after Italy made preliminary plans to prop up its banks in the wake of volatility caused by Britain’s vote to leave the European Union.

Rome says it is concerned that Italian banks, which hold 360 billion euros of bad loans, a third of the euro zone’s total, risk attack by hedge funds betting that market turmoil could tip them into full-blown crisis.

Banking and government sources said Italy was preparing to protect its banking industry by requesting more flexibility from the EU on both public spending and state aid for its lenders.

The Italian initiative did not go down well in Germany, the main contributor to the EU budget and a staunch supporter of fiscal discipline and strict rules.

“On the banking union we established specific rules as far as the winding down of banks, the recapitalization of banks is concerned,” German Chancellor Angela Merkel told a news conference after a summit of EU leaders in Brussels, the first after Brexit.

“We can’t come up with new rules every two years,” she said, replying to a question about Italy’s requests.

Merkel’s comments came after an EU official told Reuters that the Commission, which is in charge of competition policies and financial rules, stood ready to support the banking sector in Italy but did not give its backing to Rome’s plans.

Merkel’s comments came after an EU official told Reuters that the Commission, which is in charge of competition policies and financial rules, stood ready to support the banking sector in Italy but did not give its backing to Rome’s plans.

Full Content: Reuters

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