Italian Banks have €360bn in Bad Loans

Loans in Italy at present are being described as le sofferenze – the suffering. They are bad debts, straining banks of profit and stifling economic growth.

Le sofferenze are causing serious suffering. The €360bn of bad debt shows borrowers are stuck with debts they are unable to afford. This is in turn causing the banks to be unable to offer new loans to individuals and companies that need them. These situations have occurred in other countries such as Ireland and Spain but they bit the bullet and banks were cleaned up in a quick fashion. Italy have dragged their heels and have suffered as a result.

One of the main culprits for the bad loans is Banca Monte del Paschi di Siena, one of the oldest banks in world. Share prices of Italian banks have fallen sharply and Banca Monti del Paschi di Siena by more than three-quarters this year. The Italian government is considering a bailout.

When you couple this with the Greek’s having serious trouble paying their extortionate debt back to the International Monetary Fund (IMF), things are not looking so rosy for the Euro.

I do expect Sterling to fall against the Euro short to medium term but if you are a Euro seller do not procrastinate too long as it could prove costly. Moving at a near three year high is not what I would consider to be a bad decision.

Manufacturing and Services PMI the key data releases for the Euro this week

Today at 9.00 we will see the release of Eurozone services and manufacturing purchase manager index (PMI) data. PMI captures an overview of the condition of sales and employment within an economy. Manufacturing would have more effect on GDP than services so this is the more influential of the releases. I think there is the chance of slight drops but nothing enough to substantially strengthen Sterling.

If youre waiting on a currency transfer and would like to know when a good time might be, why not talk to our brokers today on 01494 725 353. We are open until 6pm to take your call today.


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