Eurozone Q2 2017 Report
The Threat of Italy’s Banking Crisis
The Eurozone has sustainable economic growth without the aid of credit increases, the public deficit is under control in most Eurozone countries—except Spain—and there is a large current account surplus.
Despite these positive indicators, the Italian banking crisis episode sent different signals about the European banking system. Fortunately, the European banking system is in a more solid position than it was two years ago, increasing the chances of successfully facing a crisis. The Italian and Portuguese banking systems are concerning: both are undercapitalized compared to their European counterparts and have profitability problems that make private recapitalization unfeasible. The Spanish banking system, which is also undercapitalized, has enough revenue to autonomously increase the capital ratio.