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.
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