“The Bank of Italy and the International Monetary Fund have both revised down their economic outlook, predicting growth of less than 1 percent this year. Political uncertainty ahead of a referendum that’s threatening to topple the government, and banks’ high share of non-performing loans, are weighing on domestic demand, while trade is damped by clouding global prospects and a looming recession in the U.K. following its Brexit vote,” according to Bloomberg.
Last year, reforms to Italy’s banking sector were seen as a potential driver of improved equity market performance. Specifically, the reforms would turn these types of banks into possible takeover targets almost instantly. For instance, the new rules could be a catalyst for a potential merger between UBI Banca and Banca Monte dei Paschi di Siena.
“A prolonged period of political uncertainty is the last thing that a sclerotic Italian economy now needs. Its banking system is burdened with non-performing loans that amount to around 18 percent of its outstanding loans, and its public sector debt has risen to 135 percent of GDP,” reports The Fiscal Times.
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iShares MSCI Italy Capped ETF