There was a certain smugness in Italian banking circles. The banchieri of Milan had been prudent. They hadn’t bought up all those dodgy Greek bonds, even when it was said Greece was the new tiger of southern Europe. Not like those foolish German and French bankers.
There were complaints about the demands to strengthen their finances by the European Banking Association, a move that would force them to reign bank loans and/or sell assets. Shareholders and executives at the top of Italy’s financial institutions were foregoing huge profits and bonuses, just to pay for the errors of their gallic and teutonic counterparts.
But then came Hungary. After Germany and Austria, Italian banks are the most exposed, to the tune of Euros 23 billion. The country’s financial giants Unicredit and Intesa Sanpaolo are respectively the seventh and fifth most exposed banks.
Hungary, in case you missed it, is at high risk of a sovereign debt default, after years of being the post-communist poster child with its boundless enthusiasm for foreign investment. It is now eastern Europe’s most indebted nation.
In a now well rehearsed process, every effort is being made by the IMF and EU to make ordinary Hungarians pay the foreign bankers’ huge bills, and failing that, the average Joe in creditor countries like Italy.
But for now, among Milan’s financial elite, there’s a bit less smugness going around.