The European Central Bank has announced the appointment of temporary administrators and a “surveillance committee” at troubled Italian lender Banca Carige, as new data indicated the country is flirting with recession. The ECB intervention follows a failure in December by the middle-weight Genoan bank to achieve shareholder support for a €400m (£360m) bond issue.
Italian banks are still exposed to a high proportion of bad loans on their balance sheets following the financial crisis. They are also closely tied to the course of national politics in the country as they are large holders of sovereign debt, risking a so-called ‘doom loop’ effect.
It comes as fresh survey data from IHS Markit pointed towards a slowdown in the manufacturing sector across the currency bloc. On a national basis, Italy scored 49.2, just below the 50 mark that indicates growth. This added “to the evidence that the economy was either in or close to recession” in the second half of 2018, according to Claus Vistesen of Pantheon Macroeconomics.
Falling New Orders in Italy
Italy Key Findings
- Production falls amid fifth successive drop in new orders
- Slowest rise in employment for four years
- Confidence at six-year low
France PMI Negative First Time in 27 Months
France Key Findings
- PMI below 50.0 for the first time since September 2016
- Fastest output contraction for 44 months
- Solid fall in new orders
Eliot Kerr, Economist at IHS Markit, which compiles the France Manufacturing PMI® survey, said:
“The downward trajectory seen throughout Q4 continued into December, as business conditions moved into deterioration territory. The first decline since September 2016 was driven by further automotive sector weakness and the recent ‘gilets jaunes’ protests.
“Output stabilisation in November was short-lived as December data revealed a solid contraction in manufacturing production. Elsewhere, faster new order decline was driven by the quickest fall in new export orders for 32 months.”
Global Recession Coming
It should be crystal clear to everyone that the entire global economy is on its last legs. A global recession is coming and the US will not be immune.
Italian and German banks will have immense difficulties.
Mike “Mish” Shedlock