ECB: Italy will have to resolve its own banking problems - UOB

Analysts at UOB Group noted ad reminded that The ECB decided to keep its main refinancing, deposit and marginal lending facility rates all unchanged last week.

Key Quotes:

"It also decided to continue with its quantitative easing (QE) program at the current monthly pace of EUR80bn until the end of March 2017. However, it announced it was extending the monetary stimulus for nine months at smaller monthly purchases.

From April 2017, the monthly purchases would be reduced to EUR60bn until the end of December 2017. The ECB said it would then assess if QE would need to be further extended.

The new staff inflation forecast is more or less unchanged from September’s edition. From 0.2% in 2016, Eurozone inflation is expected to rise to 1.3% in 2017, 1.5% in 2018 and 1.7% in 2019. This mainly reflects increasing energy prices, but the ECB warned that there are “no signs yet of a convincing upward trend in underlying inflation”.

Meanwhile, it expects GDP to grow by 1.7% in both 2016 and 2017, and then by 1.6% in 2018 and 2019. This is also more or less unchanged from September and continues to reflect the bloc’s gradual economic recovery.

On Italy, Draghi said Thursday that the vulnerabilities of Monte Dei Paschi as well as Italy’s banking system as a whole would be resolved by the country’s government."

Unicredit shares rally 9%, but fundamentally, things are not looking good for Italy or EU banks