Italy: Financially More Stable, but Structural Problems Persist

Abstract

The Bank of England has published a chart showing the actions undertaken by the governments to support financial institutions through various measures, from capital injections, to lending provisions, to holdings of assets, to guarantees. Such packages1 are around 60 per cent of GDP in Britain, 50 per cent in the United States, less than 5 per cent in Italy, the smallest percentage in 12 countries surveyed.2 This is due to two main reasons: the relative stability of the Italian banking system, and the budget constraints of a very indebted country. A long-term view is necessary to explain these factors.