Italian Style Bailout!

Italy’s government approves bank stabilization fund: prime minister By Jennifer Clark Last update: 4:04 p.m. EDT Oct. 8, 2008 ROME (MarketWatch) – Italy’s government approved an emergency law creating a stabilization fund that can be tapped by Italian banks should they encounter liquidity problems, Prime Minister Silvio Berlusconi said at a press conference Wednesday. “We did this because we needed to; all European Union members agreed they needed to be ready to deal with the situation,” said Economy Minister Giulio Tremonti at the same press conference after the cabinet approved the law. “We don’t think we’ll have to apply this law. We don’t think there are any Italian banks that need to be saved.” Tremonti was referring to a decision at a meeting of European Union finance ministers Monday and Tuesday at which members pledged to take adequate measures to shore up confidence in their banking systems and guarantee liquidity in an emergency. Bank of Italy Governor Mario Draghi, who also attended the press conference, said that Italy’s banks are on solid footing and that he hopes the fund wouldn’t be used. The Bank of Italy is Italy’s banking regulator. Mr. Berlusconi’s government said Wednesday it would fully guarantee deposits up to EUR103,000 in a move aimed at restoring confidence in the financial system amid the spreading global financial crisis. Current legislation already guarantees deposits for that sum, but only the first EUR20,000 is covered by the state, with the rest being guaranteed by banks. The measure approved Wednesday makes the state guarantor of last resort for the whole EUR103,000.