Are EU Banks Headed For A Bailout?

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Are EU Banks Headed For A Bailout?

According to David Folkerts-Landau, chief economist at Deutche Bank AG, European banks are in need of a bailout fund to the tune of 150 billion euros ($166 billion US), saying that he saw struggling banks, especially in Italy being on the edge of serious trouble.

Italian banks are currently sagging under the weight of more than 350 billion euros of bad loans and Italy’s government has been asking regulators how to avoid a massive sellout, especially in the wake of Brexit. The fear that Folkerts-Landau and other EU experts have is that Italy’s woes could spread throughout the continent, making it urgent that steps be taken now.

Thursday saw the Bloomberg Europe 500 Banks and Financial Services Index at its lowest in over seven years and European financial giants are nearing a crisis. Deutche Bank’s stock price has dropped by nearly half since the beginning of the year in another sign of trouble, despite guarded optimism from the bank’s spokespersons.

Will the EU allow Italy and other governments to follow the U.S. model and acquire temporary equity in their banks? It’s not clear at this point, but it is an idea which has been floated by Phillipp Hildebrand, Vice Chairman of BlackRock, Inc., among others seeking to avoid a European financial crisis which could spread economic malaise worldwide.

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