Italy’s fragile economy was back in focus this week with investors closely monitoring the political landscape ahead of a referendum later this year and a new report suggesting that the country could be prepared to bypass European banking regulations.
The Financial Times reported Sunday that Italy was prepared “to defy the EU and unilaterally pump billions of euros into its troubled banking system if it comes under severe systemic distress … despite warnings from Brussels and Berlin over the need to respect rules that make creditors rather than taxpayers fund bank rescues.”
Citing “several officials and bankers familiar with the plans,” the FT said that the threat has raised alarm along Europe’s regulators “who fear such a brazen intervention would devastate the credibility of the union’s newly implemented banking rule book during its first real test.”
A spokesman for Italy’s Prime Minister Matteo Renzi denied the report, however, saying that “Italy has no intention of defying Brussels on the banks. We respect the rules and prefer market solutions for our banks,” Reuters reported.
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