The bail out of Monte dei Paschi
It seems clear now that Italy will bail out Monte dei Paschi and that the Commission will in some way approve it. Italy expects to have to provide Euro 6.6 billion out of a total of Euro 8.8 billion that the bank needs. The difference between the two amounts is expected to be made up by holders of its junior debt. Bail outs of banks are subject to the EU state aid rules. At the beginning of the financial crisis the Commission essentially gave carte blanche to Member States to bail out troubled banks. Italy did not take advantage of this opening at that time. This has given Italy some sort of ‘moral’ basis to argue that the Commission should clear the Monte dei Paschi package.
Italian banks have an estimated Euro 360 billion bad debts
The situation of the two Venetian banks (Popolare di Vicenza and Veneto Banca) that have been bailed out under the Atlante programme (which now owns more than 95% of the two banks) brings into strong relief the fact that the bad debts in all Italian banks is about Euro 360 billion. The bad debts in the two banks is about Euro 10 billion while the equity values around Euro 5.7 billion. This raises the question as to where all the other debts are to be found. Italian banks have a long way to go before they can be considered healthy. And the best way to make them healthy again is to make the economy grow.
Brexit and Article 50
On 29 March the United Kingdom submitted the letter to the President of the Council requesting the start of the negotiations to withdraw from the European Union. Normally these negotiations should be completed within 2 years unless it is agreed unanimously to extend the negotiation period. There has been a marked change in the tone of the declarations on both sides in the last weeks. Most informed observers consider that a hard Brexit will be bad for everyone whatever side of the channel you find yourself. The financial centre in London that supplies the whole of Europe cannot be just dismantled and moved somewhere else. It takes time, decades if not centuries, for this sort of centre to develop. It needs banks and lawyers and accounts and consultants and education and courts of law and that takes time. The EU will be poorer without London.
Ireland and Brexit
The reintroduction of a hard border between the north and the south of the island of Ireland is not good for anyone. Or maybe it is only good for those who consider that disruption and violence is the way to keep the peace. One of the key parts of the negotiations between the UK and the EU must be to avoid the reintroduction of a hard border and to ensure, essentially that movement of people, goods and services can be as free as possible. This will probably mean that Republic of Ireland will have to accept some sorts of restrictions between other EU member states and itself. The inevitable consequence is that the Republic will become some sort of a hybrid member state.
Distribution of luxury goods
Luxury good manufactures have very sophisticated and highly controlled distribution channels so as to maintain the exclusive nature or the impression of the exclusive nature of their goods. Without this idea of exclusiveness, the products can be undermined. This is the background to the importance of case now coming before the European Court of Justice on the sale and distribution of luxury goods on internet sales platforms such as Amazon and eBay. Can luxury good manufacturers stop sales of their goods on platforms that they consider not to be exclusive. This is the question that a German court has sent to Luxembourg to be ruled on by the ECJ. The terms of the question are about luxury goods. But it is clear that any reasons that the Court comes up with must inherently cover all goods. And then the question is: how in law do you distinguish between luxury and not luxury goods? Do you leave it to the manufacturer to decide or is there some sort of objective criteria that the Court can find? Watch this space.
State Aids to support Italy
Italy is struggling with the introduction of new contracts for the financing of the RAI and for the public service obligations of Trenitalia and other bodies which provide services to the general public and which are not commercially attractive. How much can the State pay and for what. The issue of what the State can do and what it cannot do extends also to the granting of concessions to run ports or airports and the like. State Aid rules mean that it is the Commission which in effect has the competence to strike the balance between the right of the State to provide certain uneconomic services to its citizen particularly in remote areas and the need to ensure that there is competition for those wishing to provide the uneconomic services and that even if the contract is given to the national incumbent companies that those companies do not charge too much.