Economy

Risking A Run On Banks? In Italy, Euro Crisis Is Creating Nervous Banking Clients

In the small but wealthy town of Settala, near Milan, one community bank is spending extra time trying to calm a growing number of customers who worry that their savings are at risk in the face of Europe's deepening economic crisis.

Settala, Italy (Uberto)
Settala, Italy (Uberto)
Marco Alfieri

MILAN -- "Are you sure my investments are safe?" Everyone is asking the same question to Matteo R., a 42-year-old director of a bank branch in the village of Settala, 15 kilometers east of Milan.

Settala, for all intents and purposes, is a fairly wealthy village. There are 7,500 inhabitants and five banks, which would indicate there's plenty of money around. Most of Settala's residents live in single-family homes, as opposed to apartment buildings. Many have large cars. Still, residents here are jittery, rattled by crashing markets and news of the euro zone's sovereign debt crisis.

Italians have been burned before. Many suffered huge losses from their investments in Argentine Bonds, which turned into waste-paper when the country defaulted on its debt in 2002. Nowadays people are more cautious. "They are calling more and more," says Matteo R. "If a client has spare time, he or she comes directly to the bank. They want to know what's going on, they ask questions. Overall, they would like to be reassured. You know, it's a tough time."

Matteo R."s particular bank branch has a cash flow of 100 million euros, and around 2,000 clients. The clients include young couples with a mortgage to pay, wealthy retailers, craftsmen and professionals who have a bit of money to invest, retired people who have some savings, companies, entire families and a few people with large portfolios.

"People who work in small field office banks, manning the counters or in the back-offices, are going through terrible days," says Matteo R. "People are calling nonstop. They're stopping by to ask about their savings. Owners of small companies are asking for loans. Some people are cancelling their investments because they cannot afford anymore to pay even just 100 euros a month. Others are afraid of a default. In this case, we have to act not only as people's brokers and consultants, but also as their psychologists."

Suddenly short on cash

The effects on Main Street are immediate. The interest rates on Italy's sovereign debt act as a barometer tracking the costs of bank deposits. In Italy, banks are particularly important to small businesses. Companies receive roughly 91% of their funding from banks. Banks also issue about 40% of the country's home mortgages. "This situation means less money for families and companies," says Matteo R.

In Italy, the total amount of private savings is roughly 8.6 trillion euros, more than six times the country's GDP, estimated at 1.5 trillion euros. Savings are the country's life insurance. But the crisis and the market turmoil are changing people's habits. "Medium and long-term investments are being rationed. We are all short of liquidity," admits Matteo R. "Headquarters is asking us to gather money, but right now, people come to the bank only to ask questions -- or even to withdraw their savings."

This bank branch opened in the 1970s. Here the co-workers are like a family. They lunch together at the local San Giorgio restaurant or at Speedy bar. Seated at his desk, the director is busy fielding phone calls. "It was a client who wants to know if her 5,000 euros invested in inflation-indexed bonds are safe," the director explains, hanging up the phone. He adds that yesterday morning "a woman ran here to tell me she had read on Facebook that the state has the right to withdraw money from the bank account. She wanted to know if it was true."

The director has his own problems to worry about. "I arrived here last year to reorganize the office, but now I have to work like crazy," he says. The other day, the owner of a small company asked for a 25,000-euro loan in order to buy a van. "I had to say No," the bank director explains. "We are short of liquidity. I felt bad because I know him. He's a good guy. But the rules are strict."

Read the original article in Italian

photo - Uberto

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Geopolitics

Iran-Saudi Arabia Rivalry May Be Set To Ease, Or Get Much Worse

The Saudis may be awaiting the outcome of Iran's nuclear talks with the West, to see whether Tehran will moderate its regional policies, or lash out like never before.

Military parade in Tehran, Iran, on Oct. 3

-Analysis-

LONDON — The Iranian Foreign Ministry spokesman Saeed Khatibzadeh said earlier this month that Iranian and Saudi negotiators had so far had four rounds of "continuous" talks, though both sides had agreed to keep them private. The talks are to ease fraught relations between Iran's radical Shia regime and the Saudi kingdom, a key Western ally in the Middle East.

Iran's Foreign Minister Hossein Amirabdollahian has said that the talks were going in the right direction, while an Iranian trade official was recently hopeful these might even allow trade opportunities for Iranian businessmen in Saudi Arabia. As the broadcaster France 24 observed separately, it will take more than positive signals to heal a five-year-rift and decades of mutual suspicions.


Agence France-Presse news agency, meanwhile, has cited an unnamed French diplomat as saying that Saudi Arabia wants to end its costly discord with Tehran. The sides may already have agreed to reopen consular offices. For Saudi Arabia, the costs include its war on Iran-backed Houthis rebels fighting an UN-recognized government in next-door Yemen.

The role of the nuclear pact

Bilateral relations were severed in January 2016, after regime militiamen stormed the Saudi embassy in Tehran. Amirabdollahian was then the deputy foreign minister for Arab affairs. In 2019, he told the website Iranian Diplomacy that Saudi Arabia had taken measures vis-a-vis Iran's nuclear pact with the world powers.

It's unlikely Ali Khamenei will tolerate the Saudi kingdom's rising power in the region.

He said "the Saudis' insane conduct toward [the pact] led them to conclude that they must prevent [its implementation] in a peaceful environment ... I think the Saudis are quite deluded, and their delusion consists in thinking that Trump is an opportunity for them to place themselves on the path of conflict with the Islamic Republic while relying on Trump." He meant the administration led by the U.S. President Donald J.Trump, which was hostile to Iran's regime. This, he said, "is not how we view Saudi Arabia. I think Yemen should have been a big lesson for the Saudis."

The minister was effectively admitting the Houthis were the Islamic Republic's tool for getting back at Saudi Arabia.

Yet in the past two years, both sides have taken steps to improve relations, without firm results as yet. Nor is the situation likely to change this time.

Photo of Iranian Supreme Leader Ali Khamenei in 2020

Iranian Supreme Leader Ali Khamenei in 2020

commons.wikimedia.org

Riyadh's warming relations with Israel

Iran's former ambassador in Lebanon, Ahmad Dastmalchian, told the ILNA news agency in Tehran that Saudi Arabia is doing Israel's bidding in the region, and has "entrusted its national security, and life and death to Tel Aviv." Riyadh, he said, had been financing a good many "security and political projects in the region," or acting as a "logistical supplier."

The United States, said Dastmalchian, has "in turn tried to provide intelligence and security backing, while Israel has simply followed its own interests in all this."

Furthermore, it seems unlikely Iran's Supreme Leader Ali Khamenei will tolerate, even in this weak period of his leadership, the kingdom's rising power in the region and beyond, and especially its financial clout. He is usually disparaging when he speaks of Riyadh's princely rulers. In 2017, he compared them to "dairy cows," saying, "the idiots think that by giving money and aid, they can attract the goodwill of Islam's enemies."

Iranian regime officials are hopeful of moving toward better diplomatic ties and a reopening of embassies. Yet the balance of power between the sides began to change in Riyadh's favor years ago. For the kingdom's power has shifted from relying mostly on arms, to economic and political clout. The countries might have had peaceful relations before in considerably quieter, and more equitable, conditions than today's acute clash of interests.

If nuclear talks break down, Iran's regime may become more aggressive.

Beyond this, the Abraham Accord or reconciliation of Arab states and Israel has been possible thanks to the green light that the Saudis gave their regional partners, and it is a considerable political and ideological defeat for the Islamic Republic.

Assuming all Houthis follow Tehran's instructions — and they may not — improved ties may curb attacks on Saudi interests and aid its economy. Tehran will also benefit from no longer having to support them. Unlike Iran's regime, the Saudis are not pressed for cash or resources and could even offer the Houthis a better deal. Presently, they may consider it more convenient to keep the softer approach toward Tehran.

For if nuclear talks with the West break down, Iran's regime may become more aggressive, and as experience has shown, tensions often prompt a renewal of missile or drone attacks on the Saudis, on tankers and on foreign shipping. Riyadh must have a way of keeping the Tehran regime quiet, in a distinctly unquiet time.

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