The Brexit threat continues to worry the European Union. A completely new scenario that to date we still don't know how to deal with. It is difficult to calculate the possible repercussions on individual Member States and on the entire continent. Our rulers are therefore starting to think about the countermeasures necessary to prevent a possible contagion effect, but also the a posteriori consequences that could derive from the United Kingdom's exit from the EU.
BANKS: THE MERKEL-RENZI SPAT
In recent days it has become clear that one of the central themes of the question is always the same: the banks. To date, Italy is studying a plan for the recapitalization of national credit institutions which, however, comes up against clear-cut opposition from Germany.
«I believe that a certain flexibility has been granted to certain countries to encourage growth. Looking above all at Italy - said German Chancellor Angela Merkel in response to a question relating to the possibility of granting further flexibility to some Member States and allowing them to change the rules in force for the banking sector as a result of Brexit - I can say that we have adopted various solutions, but we cannot re-discuss the rules of the banking sector every two years".
Peremptory words that have only slightly influenced the performance of the securities of Italian credit institutions on Piazza Affari, slowing down somewhat the recovery attempt of the banking sector, which in the last two sessions has been trying to raise its head again after the very heavy reductions suffered during the of the two trading days of 24 and 25 June.
The statements of the Chancellor, however, were followed by those of the Italian Premier Matteo Renzi who, during the press conference held on the sidelines of the meeting of the European Council on Brexit, promptly replied, sparing not even a few "stings" at Merkel: «The 'Italy doesn't ask not to respect the rules, the last one not to respect them was Germany in 2003 because Berlusconi, who is a very generous man, allowed it,' said the Prime Minister. Currently, Renzi stressed, the issue "is not on the agenda because there is no provision for changing the existing rules" on banks.
However, the Italian premier recalled that in the past Germany used around 247 billion euros to save its banks, while neither the Berlusconi government, nor the subsequent Monti and Letta governments have deemed it appropriate to follow the German example.
«In this situation – reassured the Prime Minister – we are in a position to protect the money of account holders and citizens. There is no risk for the tax payer and for the citizen. This issue is not on the agenda, the typical attitude towards Brexit is to think about the repercussions for Italy, but we - he added - want to change the political rules of the game in the EU, not the banking rules, we want to talk of nursery schools, culture and innovation and not only of bureaucrats and financiers».
Net declarations that are not reduced to a simple bickering between heads of government, but which, overcoming the difficult nature of the subject, concern issues that could greatly affect the future of European citizens, Italians first and foremost.
THE EUROPEAN RULES ON BANKS
The BRRD directive (Bank Recovery and Resolution Directive) came into force on 1 January 2015 in the countries of the European Union, establishing the general rules for the management of banking crises. Among them is the so-called bail-in, the mechanism for involving private individuals in the rescue of banking institutions, which became operational on 1 January 2016.
The BRRD attributes to the central banks of each single state (considered as "resolution authorities") the power to plan, intervene and manage banking crises. The main purpose of the directive is to prevent taxpayers from "paying" to save individual banks, through substantial state aid.
In the recent past (2008-2014), according to an analysis by the ECB, European states would have spent around 800 billion euros to avoid bank crashes, exponentially increasing their public debt. Based on the figures reported by Eurostat we are talking about 250 billion for Germany, 60 for Spain, 50 for Ireland and the Netherlands, 40 for Greece.
Italy represents an exception in the Community landscape using around 4 billion of public money, all of which has already been repaid. With the aim of avoiding the repetition of these situations, and the squandering of taxpayers' money, the BRRD envisages the involvement of private investors.
On a practical level, this means that, when a bank is placed under resolution, in order to avoid a bankruptcy that could put depositors and customers at risk, the Bank of Italy has various "cards" at its disposal: the sale of a part of the asset, its temporary transfer to a bridge bank or the transfer of the non-performing loans to a vehicle that manages its liquidation (known as a bad bank). Subsequently, the bail – in is triggered, which consists in involving private individuals, according to the following order: in the first instance, the shareholders pay, then the holders of subordinated bonds and unsecured creditors. Finally comes the inclusion of deposits with an amount exceeding 100 thousand euros. In case all this were not enough, and only after having involved all the actors on the scene, the public intervention would start.
BANKS: NO NEED TO CHANGE THE RULES
The entry into force of the Bail-in has caused much concern across Europe. The fear is that savers will pay for "the bankers' mistakes", shouldering charges for which they have no responsibility. Fears have obviously increased due to Brexit which could have serious repercussions on the stability of national banking systems, turning the bail-in specter into reality.
The conflict between Matteo Renzi and Angela Merkel stems from exactly this: from the fear that following Brexit, emergency situations will arise that force the application of the new rules.
In reality, however, going into the details of European legislation - as explained by the CEPS (Centre for European Policy Studies) report by Stefano Micossi and others of which FIRSTonline has already accounted for – “it turns out that a mechanistic interpretation of the creditor bail-in rules is not the only possible interpretation.”
Indeed, the reading that sees the impossibility of providing temporary public money before the application of the bail-in may not be entirely correct.
When speaking of state aid, it is necessary to take as a reference article 107, paragraph 3, letter b, of the European Treaty. The latter makes it possible to consider a public intervention implemented with the aim of remedying a serious disturbance in the economy of a Member State (and Brexit could be seen as such) compatible with European law. For aid to be possible, however, it must not go "beyond what is strictly necessary to correct the market failure", underlines Ceps. The Community rules on burden sharing can therefore be set aside in the event that financial stability is at risk.
Finally, it should be noted that the BRRD directive also leaves room for flexibility, by not making the bail-in mandatory "for temporary aid to solvent banks carried out for the purpose of precautionary recapitalization on condition that it is recognized by the supervisory authorities".
Summarizing and giving an example: in the event that an emergency situation occurs, there would be no need to change the rules, as Angela Merkel argues, but it would be enough to exploit the already existing rules in order to safeguard the balance of a banking system national.
