Watching shoppers at the boutiques in Milan it can be easy to forget that Italy is a country in dire economic straits. But even if business can go on as usual for luxury-goods retailers, it can’t for the banks. The OECD projects that the Italian economy will shrink by 1.7% over the course of 2012, and an immediate recovery isn’t on the cards, with a further 0.3% of shrinkage projected for 2013. With Italian banks being mostly loan-oriented, with less activity in investment banking than their peers elsewhere in Europe, they are particularly vulnerable to economic downturns.
Talk to Italian bankers and they will position the situation in Italy as the mirror image of Spain.
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