Italy's new government should take a bold step and ask for international financial aid to reform its banks and its economy, former European Central Bank board member Lorenzo Bini Smaghi said on Monday on the sidelines of a conference in Milan, Reuters reports. Bini Smaghi left the ECB last year.
Bini Smaghi said:
Rome's borrowing costs may have halved since November 2011, when Italy was at the centre of the euro zone debt crisis, but its economy is in dire straits and shock therapy is needed. Italy is in a dramatic situation. It needs unconventional measures aimed at radically changing the way the country and its economy work.
The euro zone's third-largest economy is mired in its longest recession for 20 years.
Nearly four out of every 10 young Italians are unemployed, while companies are struggling to obtain bank funding and an uncertain political outlook is discouraging investment.
In this situation, Italy should apply for a precautionary program of aid, similar to the one it was offered in 2011 and in 2012 by its international partners. If the new government asked for international help, a bold reform plan would have to be negotiated, and this would drastically reduce uncertainty over the medium term.
Are we being conditioned to the idea that Italy is next on the bail-out (or bail-in) list?