Italy’s referendum may inspire European regulators to kick the can once again.

Italian voters go to the polls for an important referendum this coming weekend. Italy’s weakest banks could see their current market-based rescue plans scuppered if Italians deliver a “no” in the vote. If the Italian government had to step in to save these banks, holders of the banks’ bonds would have to be “bailed in” under current EU rules. That would hurt millions of ordinary Italian savers who have long held bank bonds, na?vely thinking them to be extremely safe investments. We suspect that if the vote fails and the banks are in jeopardy, Italian and EU regulators will do what they do best: cobble together a solution to put off the inevitable for a little longer, rather than risk the ire of Italian voters in next year’s elections. In any event, seeds are being sown for future troubles in European banking and politics, even if the immediate aftermath of the vote is not as dire as media are predicting. To learn more about Guild Investment Management and our investment management services, please visit www.guildinvestment.com.