Christopher Oladipo

Global Finance

Term Paper

Topic: The Italian Financial Crisis: Causes, Actions and Reactions

DECEMBER 2011
TABLE OF CONTENTS

1. Introduction

2. Causes I. Immediate causes

II. Remote causes

3. Actions

I. Governmental actions

II. Regulatory actions

III. European response

4. Reactions

I. Local market reactions

II. European market reactions

III. Effects on US and world markets.

5. Conclusion

6. Bibliography

1. INTRODUCTION The Italian crisis that rocked the Euro zone at the beginning of this quarter was sudden, yet, not really sudden. There have been signs, but the leaders were unperturbed, so it was business as usual until the eventual breakout, like an epidemic, now threatening to consume not only Italy, but the Euro zone and by extension, the European Union.[1] The Greek economic debacle was one of the clearest signs that all was not well within the zone, but, of course, the general consensus was that Greek was too small to ignite any serious panic within the zone. If at all anything was going to happen, the general belief was that it will not affect the core of the European economy, and as such, to my understanding, not worth any preparation or broad based actions by the European Central Bank (ECB). But today, all of that has suddenly changed with the Italians taking their turn at the economic turntable. It is not clearly understood that even the mighty do sometimes fall. Italy is the third largest economy in the Euro Zone, only behind Germany and France; a blow to the Italian economy is surely a blow to the Euro Zone (EZ). This is the truth that has unfolded in the past three months or so, but the drama seems not in a hurry to end anytime soon. In this paper, I will be examining some of the causes of the current crisis in Italy, both immediate and remote causes. I