Italian municipalities crippled by financial speculation

[Hannah Bell]

A conflict between local municipalities and banks has developed in Italian courts over municipal and regional authorities’ purchases of financial derivatives...

In the years between 1995 and 2008, local administrators, including public health care and transportation agencies, utilized public funds to acquire derivatives and similar financial instruments, allegedly lured in by financial institutions with promises of lower costs on loans. Cases have been reported where banks concealed commissions or demanded that localities buy derivatives in order to obtain loans.

The total exposure amount is unknown, given the nature of derivatives and the many unregulated markets on which they are traded. However, estimates put the total borrowed by municipalities at €36 billion in 2008, that is, at the beginning of the financial crisis ignited by the collapse of Lehman Brothers.

Many local administrations are on the brink of bankruptcy, a situation compounded by the massive cuts the Italian government has recently adopted through the Stability Law, which slashes a total of €11.6 billion in social spending. In the more desperate cases, city counselors and mayors have resorted to the sale of property in order to maintain solvency.

http://www.wsws.org/articles/2011/mar2011/ital-m03.shtml

[aquart]

1. Have any Italian bankers gone to jail?