Why Italy is Singlehandedly Vetoing the EU's Latest Treaty (ESM)
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- Опубліковано 8 чер 2024
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Italy has single-handedly blocked a new treaty aimed to create an EU-wide backstop for European banks, creating tensions between Meloni and other EU leaders. So in this video, we'll explain this new treaty, why Italy opposes it and what might happen next.
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1 - www.ansa.it/english/news/2024...
2 - www.politico.eu/article/its-t...
3 - www.lse.ac.uk/Research/resear...
4 - www.eurointelligence.com/
5 - www.imf.org/external/datamapp...
6 - / 1737802185751007262
7 - academic.oup.com/cmlj/article...
8 - blogs.law.ox.ac.uk/business-l...
9 - www.bloomberg.com/news/articl...
10 - iep.unibocconi.eu/publication...
11 - en.wikipedia.org/wiki/Trichet...
12 - academic.oup.com/cmlj/article...
13 - www.bloomberg.com/news/articl...
00:00 Introduction
01:04 The ESM Explained
03:45 Why Italy Hates the ESM
06:48 What Happens Next?
07:24 Brilliant
NOTE: Some commenters have pushed back against our characterisation of Italy as "one of the weaker eurozone economies". To some extent, we actually agree: there's a lazy cliché that frames Italy as the "weak" EU economy and Germany as the "strong" one, even though - as commenters have pointed out - Italy has run a primary budget surplus (i.e. excluding debt interest payments) for the best part of the last three decades, and recent stress tests suggest its banking system is one of the safest in Europe. Nonetheless, Italy does still struggle from persistently low growth and a high debt burden, which is partly why Italy has historically been in favour of deeper monetary/fiscal integration than, say, Germany, and hence why Italy's opposition to the ESM is a bit of a shock. Anyway, we're planning a wider video on the Italian economy in a bit, where hopefully we'll go into all this in more detail.
PS: There's also been some discussion about our characterisation of the 2008 crash as a "bank run" amongst nonbank financial institutions - this is fair enough, and the best way to understand 2008 is still a topic of academic debate, but for a good exposition of the "bank run" theory we'd recommend "The Fed Unbound: Central Banking in a Time of Crisis" by Lev Menand (www.amazon.co.uk/Fed-Unbound-Central-Banking-Crisis/dp/1735913707).
Thanks for watching, and we hope you enjoyed the video!
These comments don't understand that you don't only look at an economy's size to determine it's strength. One of the most important factors in economies remains it's ability to grow
As an Italian, when comparing the economies of Europe, please take into account levels of private debt also. It will give You a clearer picture of the state of the economy of different countries.
The monetary union without centralizing the individual countries debts has penalized countries like Italy, who wasn't mathematically able to lower its debt, even after keeping a positive primary balance in most of the last 30 years as you pointed out. That is why Italy has pushed for a deeper integration. A similar reasoning can be done with the large differences in the tax regimes among the different countries. You can't allow some to be perfectly legal tax heavens while preventing others to keep being competitive by conduct their own monetary policy.
thank you for adding additional nuance!
@@davidabba5310exactly!!!
4:54 mountain ranges all over the country, low birth rates, stagnating but rich economy and debt mostly held by Italians? Italy really is Europe's Japan
If only it was europe's japan I cannot remember italy being the global top gdp for years
Earthquakes, volcanoes, same latitude, amazing cuisines, we're so similar yet so different
@@e33d90italy was 5th globally (in terms of total Gdp) for a couple of years in the 90s and the 6th for most of the 80s, ahead of the UK. All with less than half the population of japan
@@felicepompa938 yeah, so as they said "for years" or as you pointed out "for decades"
@@e33d90 Man italian contemporary history is usualy ignored outside of italy. Italy has been in the 80s a strong and growing economy and the 4th power in the world. Right now is the 8th in the world and, most inportantly, is the second producing contry in Europe only after Germany. So the parallel with japan is accurate. (Sorry for bad english)
And people think the Italian Banks are the problem. Are you sure the problem are not the crap German Sparkasse and Deutsche Bank? Italian Banks sits on trillion of cash and deposits, even the only crap bank that was Monte dei Paschi is now fully restructured and making quite good net profit. Let s not talk about Intesa Sanpaolo or UniCredit or Assicurazioni Generali which are among the strongest financial institutions in Europe
As an Italian I am actually ashamed of how this whole debacle was framed in Italy just as part of this latest terrible trend of continuous electoral campaign. Lies were told a lack of political will in our decent minister for the economy which bowed down its party leader Salvini resulted in this shameful decision. Italy is actually probably the EU member who would have benefited the most from the new treaty, but as always the real benefits of the country are irrelevant, as the level of public debate in Italy is so low that politicians are not rewarded by the people for their actual successes, but rather for the narrative they push (in this case "the treaty was made to save german banks with italian househols' money... REALLY Italy?)".
On a sidenote: many in Italy are convinced that Meloni will ask for some stupid minor changes and then bring it home as a political victory, while finally ratifying the ESM, as it's obviously advantageous for Italy. Still, the fact that everything's becoming a matter on how to gain more voters ahead of the next election is just sickening and of great detriment for the country.
why doesn't the ECB just bail out the banks when a bank run happens instead of creating a pot of money? Not like the fed asked individual states to help them bail out the banks
Visto che sei italiano ti rispondo in italiano: Meloni ha sempre rifiutato il mes. Prima in campagna elettorale e ora con i fatti. Il Mes è fondamentalmente un prestito che va ripagato ed è stato considerato troppo oneroso per l'Italia. Vedremo.
On the other hand, as an Italian I am ashamed of people like you who speak out of political orientation or simply because they are unable to connect the only neuron to the brain, Meloni and his government won the elections with a popular vote so you have little to be ashamed of Italy and accept it we will see the results
*Illidan music plays* @@alessandrof1082
"The level of public debate in Italy is so low that politicians are not rewarded by the people for their actual successes but rather the narrative they push".
Man, that's true for most countries on Earth.
I'm sorry but this super simple explanation of the 2008 financial crisis is not enough. The fact is, before this crisis banks were offering money to everyone and then sold investors extremly risky investment products based on these loans. These investment products turned out super unprofitable and basically collapsed the entire banking sector. This is why Italy is against the new bailout system - they are afraid that banks, knowing they will be bailed out, will spend money like before 2008 (very reckless) and bring another crisis. And like last time, Italy may be made to take extreme asterity mesures.
I dont believe banks would be reckless just because the fund exists. This is a complex topic, this is not something the politicians just came up with, this came from the ECB most probably, right know there is a desire to remove the 1% reserve requirement for banks since it has been rendered useless (the Federal reserve already ended it).
It is also weird the Germans suddenly want this, maybe they know something I dont, it is widely known a lot of Italian banks were known to be zombie institution, but there is another weird institution the Deutshe Bank, that has been in trouble for years and its merger with another German Bank failed despite huge pressure from the German government. Maybe they are taking the path of Credit Suiss, which was also another sketchy institution for a while.
However this fund would aliviate some questions, in 2008 Ireland put 76 billion euros into a Bank, that is a lot of money for Ireland and instantly made it the most indebted country in Europe then. And the reality is that Bank was only a vehicle for other European banks, and now that Bank regulations is on the shoulders of the ECB, they also need a tool like ESM.
I honestly can't believe this point wasn't brought up in the video. The fear of legislation like this is the protection it gives to banks, it's only natural that the more protection they have, the riskier investments they will make, this making them more likely of collapse. It's a viscous cycle
@@Duncan23 Receiving this money= wiping out the Shareholders, yeah, totally in their interest to mismanage.
But that means the Italian veto is actually quite reasonable, and the treaty is not very well thought through
@@pedrorequio5515 hasn't stopped them before 🤣
Hi from Italy. Very interesting and instructive, but I suggest a factual correction. Re Salvini's party, you showed their old symbol featuring the word "Padania". The party's original name was in fact "The Northern League for the Independence of Padania" (i.e. the Po Valley). The pan-Italian party is now called "The League for Salvini Premier" and its symbol bears just 3 words: Lega Salvini Premier.
My country is bent on damaging itself
Argentina?
the EU is not a country...
Nice info!
Defining Italy as one of Europe's weakest economies is ridiculous. Italy is definitely going through a tough time but yet it remains the 3rd largest economy in the eurozone, 8th in the world and it's the 2nd industrial power in the EU behind Germany but above France...
If Italy falls, so will the whole EU. Whether they like it or not the European Commission can't afford themselves to let my country (the 3rd largest economy in the EU) go bankrupt. It would trigger a devastating domino effect throughout the whole continent.
@@Valerio_the_wandering_sprite exactly 👏👏👏
A Lot of people either forget or ignore this!!
weak = ridiculously high government debt + far right leader
The Netherlands has a GDP per capita 60% higher than italy's
The UK is a services economy yet they manufacture more than Italy and France. Rather Italy is the 3rd industrial power in Europe.
Hopefully the eu can force some fiscal prudency before the next recesion, and not during one.
Even better, they could unilaterally dissolve and not cause a continental economic crisis if one member is rubbish with money 👍
Nothing will convince Italians that they won't suffer brutal austerity measures quite like forcing them to suffer brutal austerity measures
Exactly! I dont care about countries running more than 3% deficits, i just would like them to have surpluses when times are relatively good.
@@spoonkus5893 if economic difficulties caused dissolution the UK would disappear way before the EU 😂. I will give the UK some credit though (not money their debt is high enough). Although the UK gets poorer it's stays one of the most obese nations in the world. What an achievement 👍
@@dioniscaraus6124This
it's just like in portugal we were in a deep crisis and then came passos coelho and saved the country with austerity, and now he is seen as the villan and he´s party never recovered
Which is interesting because it was actually José Sócrates from the same party which is ruling Portugal now that actually approved the austerity package and left in covardy, with back then President Cavaco Silva to use the atomic bomb and announce elections. This can be confirmed quite easily by just googling for a few seconds, but many people still think Passos was the vilain. Anyway...
Man these spam comments are out of hand
Yeah its unreal
Agreed
yes, i see them everywhere nowadays!
Noticed them too. All the nicknames looking like a WiFi passwords turhfncbduidj2345
Not sure wherther they are some weird bots or Russian, Chinese or other troll farms spreading missinformation
Combo of trolls and bots
Great video!
Wouldn’t this incentivize member countries banks to be as reckless as possible? In the best case scenario the risky investments yield higher than normal profits and in the worst case scenario the bank will be bailed out with money from foreign countries.
Average Neolib policy, I think the italians are right on this one
@metamind411 Not necessarily, access to the fund is just an emergency measure and banks themselves would still be held accountable.
Right now many EU countries (and for sure Italy) anyway have the opposite problem: they don't take risks and are not lending money.
That money is not free, who uses it has to pay interests on it.
my question is why does that pot of money need to be paid for by member states? Can't it just be printed by the ECB when necessary? Not like the fed had to collect money from individual states before it bailed out the banks
@@grimaffiliations3671 that would immediately have severe repercussions on the economy. Printing money would push inflation up, and the central bank would likely have to answer by hiking interest rates.
It would also agitate markets and decrease the value of bonds.
If you wanted to have a better way than printing money, European bonds might actually be a solution and prevent the need for the ESM.
But the Frugal Four have always been opposed.
So what is the risk for banks? Too big to fail, never ending money supply? Sounds dodgy
I was just thinking the same.
That's what it looks like on a first glance and if you're not educated in economics, yes.
So how does it look if you are educated on economics. Educate us please.
Preventing a bank run does not mean not letting a bank fail. Look at credit suisse just a few months ago. Bank run prevented, yet Credit Suisse was absorbed by UBS (another bank) by government decree and essentially ceased to exist as an entity.
@@Nermalton77 It's not as simple as "banks will get their money back from the government if they waste it so they're free to burn it". Banks will only use government bail outs as a last ditch effort because of the consequences attached to it including losing confidence from investors/customers, personal penalties on the people running it, forced restructuring and policy changes, and possible persecution. And as the guy above me said, the government doesn't necessarily save the bank, they only guarantee the money of the people who have accounts in it is not lost.
The most important part of this mechanism is the fact that if the banks *do* fail, it would cause a much much bigger loss for individuals , the economy, and the government than the comparatively negligible amount the governments would spend on bailing them out
Won't the ESM encourage banks to lend even more carelessly?
My thoughts too with these kinds of measures, I would assume the EU economists are smart enough to put drawbacks in place to balance it
I am completely clueless about ESM and banks in general, but I guess one "easy" way to counter act this would be EU laws by making over-lending a financial crime (finally), and making the ESM funds contingent on banks being sold off to ESM on the cheap, who is then tasked with re-structuring them and firing management.
No it would not. The framework is complicated, but a) state aid cannot be granted unless the shareholders, i.e. the people who control the bank have their entire capital wiped out and b) the ESM does not "give money" to banks as TLDR put it with the elegance of an elephant in China shop, it is supposed to act as a backstop lender(!) to a Single Resolution fund which is financed 100% by the same banks it is intended to save. In other words, whatever the scenario banks would need to pick up the bill in the end. Some people honestly think the EU just sat on its hands since the last financial crisis.
@@lhommeaudacieux thank you man, you were brilliant!!
@@lhommeaudacieux so this is just the banking union's 3rd pillar? Or is this different in some way?
Was the move from the gold and lose rules on lending a good idea?
Printing money non stop = massive inflation & bailouts keep the det in the system and dont let bad company's die.
Once again it highlights one of the big problems with having a common currency (and therefore a common central bank) despite the obvious big advantages for individuals and businesses. The Euro has done really well to work for this long despite the crises, but we're going to see more and more of these tensions between co-operation and sovereignty especially as more nations join the currency. I do feel the ECB is still too Germany-centric at this point in time.
That's why we need more power to EU.
Politicians will play politics with economies instead of doing their job.
@@jeckjeck3119 What you might term "playing politics" is seen by others as "representing their voters' interests". Giving the EU more power to override the concerns of a member state is a dangerous idea, one that'll pave the road for more members to leave if compromises aren't made.
@@ricequackers
UK showed how leaving is not a good idea.
And not giving EU more power will kill EU anyway, so might as well do more EU with those who want it.
@@ricequackers That's true only if you still think at the EU as "a compact between sovereigns Nations". Once you go well beyond that, it's clear the EU needs to take the steps needed to become something more. It's not a dangerous idea: it's just what we need.
Italy's stubbornness against the ESM is just the whole point: pure idiocy with a "representing their voters' interests" facade. Nice try.
@@jeckjeck3119deluded, giving EU more power is just a stupid idea on every level. What needs to happen is the abolishment of the EU is evident it doesn’t work.
"one of the weaker economies"?
Modern economies are based on debt. While nobody wants it too high, it's unreasonable to judge the whole economy after it. And, as mentioned, it's 'safe' debt, disproportionally held by Italians citizens.
Also, without accounting for debt interests, Italy's balance has been one of the best in Western Europe.
And despite all the recent crises, with Italy being unfortunately exposed (pandemic starting there, Russian energy, etc.), Italy still matches European GDP per capita, and does pretty well in terms of growth compared with Western Europe.
So what's your point?
It still is a good idea to have a European reserve of money!
After the pandemic, the video just said America recovered quicker, because Europe didn't have this fund.
And I really think you're in denial about this... Italy's economic growth is poor, that's evident by looking at the stats, so why distort the truth?
Some debt ok , like buying a house ,uk being in debt for most it history.
Italy doesn't have a weak economy per se, but it does have a vulnerable, exposed economy. Since it's entirely based on superfluous consumption (tourism and luxury goods), it's VERY vulnerable to global crises and world wars.
I could continue: Italy has one of the lowest household debts in the developed world (half than Germany as a percentage of GDP), one of the highest house ownerships in the western Europe, one of the highest life expectancies, 3rd gold reserve in the world and 2nd industry in Europe. Unfortunately all these clowns keep pushing for depicting it as a sort of 3rd world periferal EU country undisciplined and constantly begging for money.
@@user-gd1yg6le1h Singling out the UK makes no sense here. France, Germany, Italy, the United States and Russia have all been in debt for most of their history as well. The only brief periods that some of them weren't in debt have been in the aftermath of a major regime change, where the new regime refused to honor the debts of the old regime and effectively "reset" their debt through bankruptcy.
italy is the 3rd economy of europe and a netto payer. also a member of the g7. How can you call it a weaker economy? they are the number 10 strongest nation on the planet.....
number 8
Is impressive to think that life is crap in Italy depsite is one of the biggest economy in the world... this all means that our economy is absolutly rubbish.
Italy is a weaker economy, which has nothing to do with how big the economy is. Italy has a higher default probabilty compared to most other EU countries, that's why it's weak.
@@alessandrof.6546 vivo all estero, ma auguro il meglio al belpaese
Within the next 50 years there'll be 60 pensioners for every 100 workers in Italy amidst population decline. Too late for them to fix this, even mass immigration wouldn't make a difference. They should be clinging to EU funding while they can.
So what dude? The goverment doesnt make money only taxes on salaryes ffs
they also said your reasoning 30 years ago!
In italy is already 1 worker each 1.15pensioners
@@attenzioneallontanarsidall7940
And they were 100% right.
A section of the script was lost somehow during editing, there is a clear, if small, jump with no transition at 7:14!
I'm so ashamed of our politicians
Good on them I think, productivity always comes from the bottom anyway
another day, another Modern day mod historical update
Lol italian investors owns 33% of france's economy and the common viewer still thinks Italy is a third world contry, hilarious
Interesting that you left out the run on RBS, a local bank.
and commerzbank
"ADMINS report italy omg ff15"
Italy is stopping it because Italian banks are the strongest, not in Europe, in the whole world. Therefore in a crisis Italy will have to bail out German, French, Dutch, Spanish, and all other banks essentially. So they are against that, yep. All others could still go on with the ESM, without Italy. Problem is they know they can't because the fund needs Italian banks to participate, otherwise it's just a 'fund of debtors', roughly speaking, that doesn't do any real good. So the ESM will not be ratified without Italy. It must be a 'surprise' to you, as you said, but in truth, it isn't in the least.
They can make it voluntary to get around Italy then so that those that want to join can, and those that don't want to, do not have to.
Can we have a tldr on the German farmers protest?
Take a shot every time he says "Bank"
Italy's opposition stems from various reasons, including concerns about clauses in the treaty related to sovereign debt, fears of burdening Italian pensioners with foreign bank bailouts, and the political toxicity of austerity measures linked to previous EU interventions, especially in Greece.
Meloni is literally the definition of a populist politician and its disgusting how not a single politician actually does what they promise or change anything significantly 🤦♂️ with pointing fingers at unrelated things and people to the reason why italy has some issues
why do people confuse not keeping promises with populism? if you are not populist does that mean you keep all your promises? if you want to make an argument against populism atleast involve ideology and history
@@e33d90
Non populists generally don't make astronomically idiotic promises:/
@@jeckjeck3119Every politician is populist to some extent, and here in the Netherlands the least populist politicians lie and promise the most, what are you even basing such seemingly universal truths on? is it just your dislike for populism that you cannot seperate from political analysis?
@@e33d90
Not universal, just general.
Populists have proven unreliable. Even more than those they replaced.
@@jeckjeck3119
Don't know what to reply?
To be fair, vetors are single-handed.
How can you characterize Italy's economy as being weak based on debt-gdp ratio? Japan has an even higher debt-gdp ratio. Are they a weak economy?
Leftoid pro-EU biased perception. Many people call this channel as unbiased because it is biased towards their opinion.
Japan has it's own sovereign currency. It doesn't need to be told how to run it's economy by foreign entities, and it certainly doesn't need to have austerity or "fiscal discipline" imposed on it by outside entities. It's in a whole other league
@@grimaffiliations3671 The fact Japan has a stronger economy means that it would be more capable of tanking risks of foreign banks than Italy, further enforcing Meloni's refusal.
@@Hardcore_Remixer What i don't get is why the bail out money needs to be paid for by individual states? The BOJ or the Fed don't need to collect money before they bail out banks,so why does the ECB?
Yes.
@1:40 not really a self fulfilling prophecy, more of a positive feedback loop
*Positive feedback loop
not negative, were it be negative the bank run wouldn't happen
got them flipped. cheers@@ILSCDF
@@ILSCDF Bro's correction got corrected and he just edited his comment without acknowledging it
@@grimaffiliations3671 np, it's not a big deal
🇪🇺: HUNGARY NOO!
🇭🇺: What?
🇪🇺: Sorry force of habit ITALY NOO!
I get that reference
Bro a single country vetoing is so dumb 😭
why do you need a big pot of money? just print it when you need it!
Je mange de la pizza. Je joue au foot.
I think it's much "easier" than that. The game is played in 2 tables, in one there's the ESM, in the other the stability pact. Countries with banks with low capitalization or extreme exposure wants ESM for banks, as a parachute. Italy wants a less strict stability pact because the 3% deficit rule and the 60% debt to gdp ratio rule would basically destroy whatever is left either of Italian State administration by spending cuts or Italian economy by taxes increase. So what to do? First: hold the EU hostage weaponizing the ESM; second: find a good agreement on the stability pact. It might seem immoral, but it is a question of life or death for Italy, Meloni's playing all her cards.
0:17 the way it is phrased suggest that all of these countries are in eurozone which is not true
Oh-oh Cat Fight 😂
Italy living up to its past Mussolini-like raucous behaviour among the West.
Napoleone was of italian origins too, not french 😅
I hate how we talk about bailing out banks and forcing austerity on states because banks have made too many insecure loans.
A recent economic study from the Netherlands determined that had Italy been allowed to spend similar amounts as Spain or France during the aftershock of the Great Recession and euro crisis, rather swallow the intense austerity that was imposed on it, it would have been better for Italy and the EU.
The brutal austerity it carried out forced a dramatic and sustained period of unemployment which drained state resources even more and in turn raised the debt even higher than it would have been in the long run. Not only would of Italian GDP recovered much faster and stronger without this immediate austerity but its debt (as a percentage of GDP) would have ironically also been much lower by now. Italian debt was on the decline before 2008/9, but now it’s interest payments on debt are starting to get out of hand.
Austerity really is the enemy of prosperity. These countries wouldn't need to be forced into it if they had their own sovereign currencies
if.
La storia non si fa con i se e con i ma.
@@marcoac-sx6lq Ovvio, pero si impara da cos'e successo per capire meglio il nostro presente. Mica penso che questa voto era intelligente !
@@michelangelomissoni945 Se non avessimo già il 100% DI DEBITO....te lo sei scordato quel particolare?
Problems won't be solved in Europe until each citizen truly sees themselves equal to those who live under a different flag.
And sadly that's probably never going to happen. Too much history.
Which will not happen within the foreseeable future. Europe is made up of different nations and culture. Diversity is our strength!
@@VitoVitonerLanci It would be ok without right wing policies and psuedo-politicans
Not going to happen, no major country in Europe associate with the EU more than their own national identity - more for the vanity of EU politicians to seem equal with China/US
That will NEVER happen. Europe isn't a country and will never be. People suggesting this are insane psychopaths to say the least.
The problem for Italians is that the ESM Is designed to save Germans bank from bankruptcy, and since as opposed to Germans Italians banks are actually in a good shape there is no desire to put money to help the reckless German banks
keep believing that nonsense...
Why is the financial infrastructure being handled by for profit organizations?
The infrastructure should be non-profit and not being depended on greedy people.
Of course their veto was single-handed. That's kinda the definition of a veto.
If the EU wants to be a country, hold a constitutional convention and be done with it. This gradualist approach boggles the mind.
It’s almost as if we will wake up to find a United States of Europe on the atlas, but no one remembers which of the 150 multilateral treaties made it happen.
Depending on this administration is totally lose. Investing is the major key that can secure your family's future. Missing out on this opportunity would be a mistake. I pray you become successful 🙏🏽
Honestly speaking, investing is a smart way to secure your family's future, grow your wealth, and stay ahead of inflation.
You're right! It's important for everyone, especially those approaching retirement to have multiple streams of income, this way, during retirement, you can enjoy the benefits of your investments.
Exactly,The key to financial freedom and wealth is someone ability to convert earned income into massive profit to build generational wealth.
absolutely right,many people are really ignorant of the massive income in investment and that has been the major reason limiting their trading.
@@badeni_zlsnObviously talking about been successful, I know I am blessed if not I wouldn't have met someone who is as spectacular as mrs Ava Kimberly..
ESM has one gigantic fault and that is the ideia that banks should be bailed out.
The people who have money in the bank should be paid but the bank and respective shareholders should be demanded to sell all assets to pay that money and ESM would just pay the remainder. This would make banks be WAY more careful than they are now and avoid many future crises
not jailing the bankers after 2008 was a mistake
Aren’t the banks literally bankrupted before they are bailed, i.e that’s kind of what happens?
But banks are important, we need more spending to increase the economy. It’s too weak currently, due to underspending from banks.
@@vignotum132 actually not really. Usually banks are bailed before all their assets are used to "pay the bills", that is why, for instance, you see billed banks keep their office buildings and such and then just continue operating. Not all of them but many.
As for the shareholders, let's say you purchase 1k USD of bank A stock and for the course of some years the bank takes some high risk gambles that payoff and your stock is now worth 2k. You are somewhat cautious so you think "I'm going to pay myself out, take the 1k I invested and leave the rest of the investment". At this point you effectively have no money at risk, if the bank goes under because of those risky tactics you will "loose" the 1k you have invested but in fact you have lost nothing because you have already taken back the money you spent. What this means is that shareholders share on the profit but not so much on the risk, making them pressure banks to act in a more risky manner that, when goes bad, causes crisis.
The thing about the utility of banks is that yes that they are useful if they behave in a responsible manner and help both individuals and companies by lending money. When they start gambling with their depositors cash (notice here I'm not talking about investors cash) in search of huge profits that then are then split by investors instead of safeguarding the deposits, that can actually kill companies and countries and that should be heavily punished.
Just think about this, many banks have a 150k guaranty, that means that, if you have up to 150k in your account you have 100% certainty that you can take all your money at any time. Can you imagine how much a small to medium company has in the bank at a given time? Now imagine the bank goes under and you cannot pay your employees nor suppliers on time? Even if afterwards the central bank bails them out, the delay in payment could kill you.
That is what happened with some companies that had cash in the Silicon Valley Bank
@@CarlosKTCosta but isn’t there a problem with banks not spending enough right now?
@@vignotum132 kind of depends on how you look at it.
Sure banks have a lot of capital so they do not need loans to make more money, thus loan interest rates are high, and they also do not need deposits so deposit rates are low and these two things combined make for a very bad economy.
On the other hand, they are taking advantage of the still upward trend of growth (S&P500 is around 12% up in the last year) to have all that capital invested in stocks and bonds but also some venture capital stuff. That is generally good for the economy. Also, since many banks invested in real estate, they are also controlling the flow of houses to market, keeping prices high which, sucks for people but it’s very good for the general economy.
So yes on the one hand the banks are not spending but on the other hand they are and that is why the caca has not hit the fan…yet…
Let’s just hope most of them are being careful enough to avoid another crash… let’s not forget the last **20’s
just print more money. infinite money glitch
Italy: "is what you get for never having heard our complains about what don't work in EU".
From Wiki:
The economy of Italy is a highly developed social market economy.[27] It is the third-largest national economy in the European Union, the second-largest manufacturing industry in Europe (7th-largest in the world),[28] the 8th-largest economy in the world by nominal GDP, and the 12th-largest by GDP (PPP). Italy is a founding member of the European Union, the Eurozone, the OECD, the G7 and the G20;[29] it is the eighth-largest exporter in the world, with $611 billion exported in 2021. Its closest trade ties are with the other countries of the European Union, with whom it conducts about 59% of its total trade. The largest trading partners, in order of market share in exports, are Germany (12.5%), France (10.3%), the United States (9%), Spain (5.2%), the United Kingdom (5.2%) and Switzerland (4.6%).[30]
In the post-World War II period, Italy saw a transformation from an agricultural-based economy which had been severely affected by the consequences of the World Wars, into one of the world's most advanced nations,[31] and a leading country in world trade and exports. According to the Human Development Index, the country enjoys a very high standard of living. According to The Economist, Italy has the world's 8th highest quality of life.[32] Italy owns the world's third-largest gold reserve,[33] and is the third-largest net contributor to the budget of the European Union. Furthermore, the advanced country private wealth is one of the largest in the world.[34] In terms of private wealth, Italy ranks second, after Hong Kong, in private wealth to GDP ratio.
Italy is the world's seventh-largest manufacturing country,[35] characterised by a smaller number of global multinational corporations than other economies of comparable size and many dynamic small and medium-sized enterprises, notoriously clustered in several industrial districts, which are the backbone of the Italian industry. Italy is a large manufacturer[36] and exporter[37] of a significant variety of products. Its products include machinery, vehicles, pharmaceuticals, furniture, food and clothing.[38] Italy has a significant trade surplus. The country is also well known for its influential and innovative business economic sector, an industrious and competitive agricultural sector (Italy is the world's largest wine producer),[39] and manufacturers of creatively designed, high-quality products: including automobiles, ships, home appliances, and designer clothing. Italy is the largest hub for luxury goods in Europe and the third luxury hub globally.[40][41] Italy has a strong cooperative sector, with the largest share of the population (4.5%) employed by a cooperative in the EU.[42]
Big does not mean strong fyi. It’s risking collapse
@@vignotum132So does uk's
@@NoName-hg6cc yes I know
@@NoName-hg6cc although you could argue the UK’s economy has already collapsed
Are his eyes getting bluer and bluer ???
Well that's good then if its not absolutely urgent don't do something in a form that will hurt our member.
The ESM is great for the economy. The EU is currently hurting it self, that’s why it needs to be done
Its a shame we didnt have big balls aswell
An easy solution would be to force the ECB to bail out the banks
Easy for whom? If I'm the ECB, I'm not going to insure the accounts of a bank that doesn't assure me, under contract or law, that they are doing business responsibly.
Get ready for 'Italexit'
Heheheh Giorgia goes brrrrr
Maybe if the EU helped Italy with the migrant issue in the mediteranian Italy might feel less put out by Brussels. Also, the 2008 financial crasis had ZERO dynamics founds in a Run on the Bank. A firesale has nothing to do with a run on the banks.
We are good at number manipulation. Don’t worry you will be paid peanuts still, those number are fairly detached from actual life.
Sometimes I don't know which politician are the worst, Italian or Brits.
Britalians.
@@pauli2169 the worst!
Excellent video. But I can guarantee 100% that the government took a political decision, not a technical one. Minister Giorgetti was ready to sign the ESM, but he was outvoted in the Council of Ministers . The fact is that FDI and Lega campaigned against the ESM before the elections and , given that the european elections are imminent , they can not afford to loose voters by changing stance about the ESM. Btw, Italians voters do not have a clue about how the ESM would work.
If any of this safety net programs wouldnt exist, banks would not risk citizen money so freely, maybe not having this is the first place means they would have to build strong wealth fundations yes or yes, even if that means doing it slowly ( aka "slow growth")
You mean to say not having a safety net is the safest way of preventing risky behaviour?
@@ecoideazventures6417 When talking about institutions whose sole purpose is making money, yes.
@@ecoideazventures6417 Obviously. The 2008 crash happened in two sectors in the US. Mortgages and banks, two of the most heavily regulated institutions. The banks and mortgage lenders realised they could risk everything in a win-win scenario. If their risky bullshit worked, it made money. If they lose everything the US government is legally obligated to bail them out. The bankers just did what any person would do in that scenario, be reckless.
More than time that we move to mayority vote. To prevent sht like this.
Or something like a 5/6ths majority. Then you would need 23 out of 27 member states. Even that would be a lot better.
@@lllluka you mean the super mayority they discussed.
@@rubikfan1 I am not aware of any such discussion
Mention of the 2024 EU parliament elections would have been welcomed
Give it time, the Italians will flip sides eventually.
I mean she is the leader of a eurosceptic party. If anything, her agreeing with the EU on certain important stuff despite that is already a positive surprise.
I disagree with her political alignment so much that it pains me to say this, but Meloni seems like a competent and serious politicians from everything that I hear about her.
You need to get up to date on EU BAIL-IN rules. Next time there is a bank crisis it individual savers, mostly those who have worked and saved all their lives who will be see their life saving disappear. This is EU directives, put into law by national goverments. Pres. Holland put such a mechanism in place in France in 2015.
Something not talked about enough during the Euro Crisis is how the US bailed out the EU, out of the 87 banks the US bailed out 43 were Foreign based and almost all of them were in the EU.
USA is printing dollars = whole World is bailing out USA every time when they do that as whole World is using dollars as primary curency...
This is an issue.
Just let the ECB say that they are no longer "lender of last resort". See Italian interest rise beyond 20% and then default. Problem solved.
Italy never defaulted on its debt even in the biggest crisis it ever experienced, the post WW1 crisis, instead we turned fascist…make of that what you will.
In 2012 when Draghi saved Italy by saying that the ECB was the lender of last resort, if not, Italy would have defaualted and the eurozone would probably have failed. @@ad_astra468
@@fizh5241 History isn’t written in ifs, did we default? Nope. Would have we defaulted if it wasn’t for Draghi? I don’t think we can know, Draghi’s “whatever it takes” came in mid 2012, the crisis had been going on for a year already.
We do know one thing however: the international community cannot be trusted whatsoever, which is why Meloni is still pushing for debt autarky despite having massively reduced the percentage of debt held by foreigners already from 2011, the debt is only safe in domestic hands who will not dump it at the slightest sign of turmoil or change of rating by Moody.
Then Italy refuse to pay any debt. France, Germany and France collapse.
Italy becomes part of USA. The rest of Europe rots
@@ad_astra468 there is always a 1st time.
They should stop bailing out the banks. A banks goes bankrupt,the state pays to the people that lost their money everything back.
You oversimplified this towards EU bias,, holy hell.
Big Meloni doesn't mean big love for the local pastrami
The explanation is somehow over simplistic but I do agree with the overall analysis. The crisis of 2008 is a result of multiple decades of over spending. Although this over spending between the EU and the US certainly has different root cause we cannot deny that the impacts are similar. Over all we have lived over our means for approximately 80 years. The concept of the infinite growth has been finally debunked. The crisis of 2008 has drastically changed the world and we’ll never get back to lifestyles before that crisis.
what do you reckon lads, georgia meloni, would she get it?
Poor Italy austerity
Italian government concerns do not seem unreasonable
In other words, banks would be able to lend without any safeguards because they know the government will bail them out no matter what. Why let only one bank go bust when we could bankrupt the whole EU!!
This is so stupid and unneeded, customers are already insured for their money so all this does is protect banks. Typical corporatism bureaucracy from the EU yet again.
Yeah except banks have never been stopped from making bad decisions already. Also, austerity isn't for banks but people and It just hurts that which actually drives economies which is consumption. You can still punish banks and bankers but y'all are witless like us in the US. A backstop is actually a good idea and one aspect of American finance done right. What we don't and you likely wont do is actually punish those bad actors responsible for bad financing but instead hurt people.
@@RaveYoda Ur missing the point. In the current system failing banks are bought out, bailed out or go bust (but the money is insured and people have security). The difference in the new system is that there is now no INCENTIVE to be responsible since u are GUARANTEED a government bail out no matter what.
😮
Meloni is right, the times are not stable enough to make such a system safe.
Veto by someone else than Hungary? Impossible...
nooooo you are not allowed to veto you should just agree with everything waaaaahh
@@e33d90you shouldn’t veto something widely agreed by economists to be a good idea
Trust Economists huh@@vignotum132
i think the whole 'everything must be unanimous' dogma is just a bit overdone. switching back to something more '50%+1' would blunt many of these individual temper tantrums.
As an Italian, I agree, we would have now almost zero illegal migration, an European constitution, Eurobonds, a growth pact instead of a stability pact, a unified bank system and, yea, some fund named ESM that Italy won't ever use anyway.
How about making rules more restrictive for banks
TLDR starts at 4:42
ESM could be a good idea, but I think that this could spoil the banks to lend money without limits because that budget would be there to save them.
The banks should always have a maximum of 10% of the money in their reserves to return money to those who ask for it.
As an Italian, i have to say it.
The italian people are traumatized people. The italian people have hate towords their government in their blood. We have a bunch of different problem that our government isn't able to resolve and that even the EU isn't able to resolve given the contrast with our national government in the metgod of resolution.
The italian government is a cancer which for generation it was governated only by idiots, and if it will retake the power to control his currency, surely it will bring it down to hell. I don't trust the EU to follow his decision with closed eyes, since even the more western country exploited it for realizing their interests, but i think that it have a more efficient and less autorestructive financial policy, so, in this case, like the majority of the time, I trust more the EU that my government
Yeah, we have no vision for the future. Everyone (citizens AND politicians) only cares about short term, short sighted decisions and NOTHING ever truly changes for the better.
As a nearly 40 year old, I don't see any future: internal divisions, low wages, dead and hyper corrupt job market (especially the public sector), high tax evasion, no pensions, almost nobody is having children, most of the population survives on savings accumulated by our parents and grandparents.
That's why everybody who has half a brain and the means to do it leaves as soon as they can.
Nothing is going to change and this ship will sink, it's only a matter of time. Mark my words.
It's not pessimism. It's an informed opinion based on the last 25 years.
you limit how much lending and to whom and that isnt a factor anymore.
The fact that you know these problems are here to stay means that not everybody doesn't look to the future.
I have the luck of being young and even if it could be an impossible objective, I feel that I SHOULD try to change this
@@jonathanodude6660 Yeah, but banks always should have some money to return. If they lend all it's nearly impossible that anyone will have their money in cash, probably only in electronic form
The moral hazard of bank insurance is not so bad for at least two reasons: (1) bank insurance comes with increased regulations and oversight, and (2) it doesn't really change the outcomes from a bank manager's point of view: if there's a bank run that forces the bank to use the insurance backstop, the depositors are made whole but the bank itself is usually taken over by regulators and occasionally reorganized but usually absorbed by a larger more solvent bank.
No government should be forced to bailout banks.italy is right to tell the eu no.
Italy doesn’t mind taking down the rest of the EU cause their country is already shit and their young people leave in droves
Why so many bots.
Because russia china and iran want to destabilise the west
Imagine if presidential elections had to be unanimous...
Joseph R. Cooper : "If you want unanimous consent, you're gonna have to get it from one of the other owners."
I believe this kind of legislation is counter productive, it gives banks too much protection and only leads to them making riskier investments and more likely of collapse.
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Banks don’t create money out of thin air. Their assets and their liabilities will always match. Where they make their money is taking in short term deposits and lending it out in long term borrowing eg mortgages. Only the central bank has the capacity to print more money.
This is what creates liquidity issues as the bank cannot automatically access money tied up in mortgages. Especially important in stresses and bank runs
100%, This is why it doesn't make sense for countries with trade deficits to call for a balanced budget. The private sector needs to get it's surplus from either the rest of the world or the government
Italy should have vetoed many other treaties long ago.
I'm happy to hear the treaty failed. Banks have the power to take care of themselves, we don't need socialism for capitalism, we need socialism for the people.
How about increasing the reserves of the Banks to 30% not 10%.
What kind of lunatic thinks its good for the economy to lend more money than you have? Truely the lack of economic understanding within the finance sector for the last 200 years is astounding.
"This is generally a good thing for the economy" when talking about fractional reserve banking - nice take
fractional reserve banking is good for the economy actually.
@@bluegaming1346 I disagree - I don't see artificial creation of money as a good thing, even before its economic effect.