I was in Milan last week, giving a talk on Brexit, when news broke that Italy’s biggest bank had lost its chief executive. UniCredit is close to crisis, its share price having plunged 40pc during 2016. The entire Italian banking sector is looking extremely fragile, in fact, with bank share prices down, on average, by a third since the start of the year. You don’t think that matters to the UK? Well, think again.
We’ve heard a lot of blood-curdling statements about “the dangers of Brexit” over recent weeks from the Treasury and the Bank of England, vital institutions which, regrettably, now seem to be entirely politicized. But we hear much less from officialdom about the considerable dangers of staying in the European Union.
I’ll never forget Adama Soro. Just 21-years old and from Cote d’Ivoire, he recently told me a heart-breaking story. I met Adama in Paris, while doing some research into social depravation in France. He was polite, articulate and spoke the most beautiful French. Yet, four years ago, Adama fled from his West African homeland and hitch-hiked across the Sahara to Libya. There, in his own words, he was “shot at by the police, arrested, beaten, tied-up and thrown in a tiny fishing boat”.
Over lunch, and then as we walked, Adama described how that boat was towed out to sea, then left to drift. “There were 25 of us and we had hardly any food and water,” he told me, as we wandered the French capital. “Only eight of us survived and made it to Italy,” Adama recalled, as tears came into his eyes. “I saw behavior on that boat I didn’t think was possible”.
Long-suffering investors, desperate for some good news, have seized on the headlines from the latest in a long series of “last-ditch” European summits.
In Brussels on Friday, Angela Merkel certainly indicated some concessions on the use of collective eurozone bail-out funds to address soaring Spanish and Italian sovereign borrowing costs.
The German Chancellor, the argument goes, has “finally capitulated”, now agreeing to back-stop the banking sector debts – and, therefore, the worst of the sovereign debts – of the single currency’s profligate “Club Med” members. And so, we’re told, the eurozone will is now headed for the sun-lit uplands of stability and policy coherence.
“These global economic problems have their roots in the fools’ paradise we all used to live in,” observed Peter Mandelson on Friday, to a packed seminar at the St Petersburg International Economic Forum.
“Pretty much everyone borrowed and spent beyond their means and that’s now catching up with us,” continued the former Cabinet Minister. “And it’s the inter-twining of the sovereign debt and banking crises that makes any eurozone resolution extremely difficult”.