Newsgroup: it.politica.internazionale
Titolo: “Naples is technically bankrupt”

http://www.bloomberg.com/news/2014-02-06/naples-flirts-with-detroit-fate-as-budget-rejected-euro-credit.html
 
 
Naples Flirts With Detroit Fate as Budget Rejected: Euro Credit
 
By Lorenzo Totaro  Feb 7, 2014 11:22 AM GMT+0100
Six years after mounds of trash in the streets of Naples underscored its 
shaky finances, the Italian city may risk a default after a court 
rejected plans to cut municipal debt of about 1 billion euros ($1.36 
billion).
 
“Naples is technically bankrupt,” said Riccardo Realfonzo, a professor 
and former Naples city councilman for economic affairs. “If the auditors 
won’t change their mind, Naples won’t get a key loan from the state and, 
like Detroit, will become unable to pay money to its employees or 
provide basic services.”
 
The regional auditing court ruled last month that the budget-cutting 
plan for Italy’s third-largest city was unrealistic. A loan Naples got 
from the national government last year will add to its debt and reduce 
the benefit of the planned spending cuts, in the court’s opinion.
 
The city denies a default is heading its way. Mayor Luigi De Magistris 
said Jan. 20 the city of 960,000 would appeal to the court at the 
national level, adding that he would call Prime Minister Enrico Letta to 
seek advice.
 
The regional panel’s decision means the finances of Italy’s most 
populous city after Rome and Milan run the risk of being put under 
special administration. The predicament could be like that of Detroit, 
which filed the largest-ever U.S. municipal bankruptcy in July, saying 
it didn’t have enough money to cover $18 billion in liabilities while 
also providing adequate police, fire and other services to the city’s 
700,000 residents.
 
Coffers Burdened
 
Government bonds in Italy rallied in the first month of the year on 
signs the crisis that pushed the nation’s borrowing costs to euro-era 
records had abated. Still, bailing out cities like Naples and capital 
city Rome might weigh on state coffers burdened with the euro region’s 
second-biggest debt.
 
If confirmed by the Rome-based national auditors court, last month’s 
ruling may push Naples closer to defaulting on its debt with serious 
potential effects for the local administration’s 20,000 employees, its 
suppliers, transport and welfare services, Realfonzo said.
 
Leaders in the national government and Naples agreed last year on a loan 
of 220 million euros to be re-paid by the city within a decade. The deal 
was based on the plan to cut spending by 700 million euros over the 
period. Mayor De Magistris said the city already reduced spending by 200 
million euros last year compared with the previous year.
 
Monitoring Developments
 
“We are of course monitoring the developments” regarding Naples, Pier 
Paolo Baretta, finance undersecretary in Premier Letta’s government, 
said in an interview yesterday. He said he is confident that a solution 
can be found for Naples and other Italian cities facing serious 
financial difficulties.
 
The city’s debt amounted to 1.2 billion euros at the end of 2012 and was 
cut by “about a couple of hundred million” euros last year, Salvatore 
Palma, the city’s current councilman for budget and economic affairs, 
said in a Feb. 5 telephone interview. He also denied that the loan from 
the national government amounts to a lifeline for the city.
 
“What the court did was to acknowledge the history and the slow progress 
of our finances in the past, rather than an analysis of the spending 
cuts passed in 2013 and planned for the future,” Palma said. “The fact 
is that even without getting the rest of the loan from Rome, we will be 
able to keep paying our employees and suppliers this year.”
 
Derivatives Contracts
 
The damage from a possible Naples default may not be limited to the 
city. A number of international banks including Barclays (BARC) Plc, 
Deutsche Bank AG (DBK) and UBS AG (UBSN) had derivatives contracts with 
Naples, according to a filing posted on the city’s website and attached 
to the documents for last year’s budget.
 
“Most of our contracts mature in 2035,” Palma said. “The mark-to-market 
at this time is not favorable nor are we in a condition to be able to 
close them.”
 
Across Italy, cities faced with shrinking income and rising expenses 
bought swaps from banks to cut short-term interest costs, putting them 
at risk of paying more in the long run.
 
“It’s a schizophrenic situation where the government deemed the city’s 
plan reliable and granted the loan, while the auditors have now decided 
otherwise,” said Adriano Giannola, president of state-funded research 
institute Svimez. “The court decision also raises more general questions 
about whether any austerity policies can work without an economy that 
grows enough to support it.”
 
Stopped Shrinking
 
The Italian economy stopped shrinking in the third quarter of 2013 after 
a two-year contraction, its longest recession since World War II and the 
fourth since 2001. Naples, located in a southern region consistently 
among the country’s poorest, was particularly hard hit by the slump.
 
The city suffers from deficiencies in its public services, including a 
bus system that was almost brought to a halt last year amid strikes and 
fuel shortages.
 
Naples also went through a well-documented series of garbage crises 
caused by overflowing landfills such as the one in 2008 when authorities 
estimated that there were 30,000 tons of trash in the streets of Naples.
 
The government loan agreed upon last year prompted an upward revision in 
Naples’ outlook in October by Standard & Poor’s Ratings Services to 
stable from negative, while a BB-long-term issuer rating was affirmed.
 
“Naples’ liquidity position has improved, mainly because of higher 
central government cash advances than we expected,” the rating company 
said last year.
 
Court Ruling
 
So far, the government has already paid out 58 million euros of the 
total 220 million-euro loan. Should the city’s appeal of the auditors 
court ruling be unsuccessful and the central government fail to aid 
Naples in other ways, the city could be placed under special administration.
 
“I’m not in favor of new financial aid to the city now,” said Realfonzo, 
who teaches economy at the University of Sannio near Naples and resigned 
from his post as councilman in 2012 after publicly questioning the 
city’s ability to pay. “Instead I’d favor special administration, and 
only afterward financial intervention” by the central government.
 
With a gross domestic product per capita amounting to 65 percent of the 
national average, Naples’ economy might be unable to sustain a new 
restructuring plan that includes increasing local taxes and fees. 
According to the latest available city statistics, from 2012, Naples had 
an unemployment rate of 22.6 percent, more than double the 10.7 percent 
for all of Italy at the time.
 
“The local government has proved to be not up to the job, but if new 
elections take place there is a risk of falling from the frying pan into 
the fire,” said Naples resident Giovanni D’Andrea, 75. “What should the 
city do to improve the finances? There isn’t much to sell, except the 
sun and we’d better keep it -- it’s our biggest asset.”
 
To contact the reporter on this story: Lorenzo Totaro in Rome at 
lto...@bloomberg.net
 
 
To contact the editor responsible for this story: Craig Stirling at 
cstir...@bloomberg.net
 
-- 
Namib
.....
Sherif of Wazan: Great Raisuli, we have lost everything. All is drifting 
on the wind as you said. We have lost everything.
Raisuli: Sherif, is there not one thing in your life that is worth 
losing everything for?
[they both begin to laugh]

 
http://www.bloomberg.com/news/2014-02-06/naples-flirts-with-detroit-fate-as-budget-rejected-euro-credit.html
 
 
così impara De Magistris
http://www.napolitoday.it/politica/de-magistris-visita-israele.html