Italy Has a $127 Billion Debt Problem It Can’t Easily Resolve
Italian companies had a record $127 billion of Covid-era state-backed credit lines outstanding as of June 30
The government is implementing an aid package allowing companies to spread out their energy bills over as many as two years, and providing gas and electricity suppliers a 90% state-backed guarantee on their exposure to the rescheduled bills.
Any additional support for companies in the form of debt just postpones the pain, leaving them with heavily indebted corporate structures that could become unsustainable if revenue and profits are hit in a recessionary environment, warns Stefano Caselli, the dean of SDA Bocconi School of Management in Milan.
Guarantees were offered to companies across the credit spectrum, even junk-rated ones. Banks were willing to supply credit lines knowing they’d be covered for a great majority by the state.
So the key question now is when and how will all this debt be repaid.
Bloomberg 28 November 2022
If Italy Slides Toward Default
Italy’s debt has long been the Achilles’ heel of the euro area.
Bloomberg 16 November 2022
https://englundmacro.blogspot.com/2022/11/if-italy-slides-toward-default.html
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