Similarly to Cyprus, about 50% credits are acknowledged as defaulted in Italy, even though the index is higher in Cyprus. How can an island as small as Cyprus be compared to the fourth-ranked European economy of Italy? Will the ECB give a hand to the Italian banking system in the event of its collapse? This is a good question to ask.
By prudent assessment of defaulted loans, Italian banks will be urged to write off about 80% of the amount of these loans and thus bring the Italian banking system on the brink of bankruptcy.
This jeopardizes the whole of the European banking system, where defaulted loans are accounted for as much as €360Bn.