As Italy’s government prepares to shield retail bondholders under its bank rescue plan, it probably won’t be helping many ordinary folk.
Just 5.4 per cent of Italian households own bank bonds, and those families are more than twice as wealthy as the national average, according to an analysis of Bank of Italy data by Bloomberg.
Cabinet ministers agreed early Friday to plow as much as €20 billion into the country’s lenders after Banca Monte dei Paschi di Siena’s capital-raising failed, under terms that will help protect retail owners of bank debt.
Bloomberg’s calculations cast doubt on the argument that the government must act to protect pensioners and families.
While European Union rules for state aid dictate that junior bondholders must bear losses before a bank can – in extraordinary circumstances – receive public support, prime minister Paolo Gentiloni and finance minister Pier Carlo Padoan have both said their intention is to protect retail savers.
"There is a tendency in Italy to use the emotional argument of the pensioner and the widow and orphan to protect people who actually don't deserve protection," said Nicolas Veron, a senior fellow with Bruegel, a Brussels-based think tank.
“The competition experts in the European Commission are very aware of this. But in Italy it’s essentially taboo.”
Mr Padoan on Wednesday reaffirmed the government’s commitment to ensure “maximum protection for retail savers” who own bank bonds.
Mr Gentiloni’s office said earlier this week that its aim is “protecting savers.”