So far Italian banks do not seem to have been directly hit by the credit crunch, but the center-right government of Prime Minister Silvio Berlusconi is debating on the need of nationalizing the country's banks in case of emergency. In fact, the government has proposed launching a plan on reforming the Italian banking system.

"The governmental reform plan of the banking system envisages the possibility of bail-outs," Boeri said. "The state is supposed to restore liquidity by intervening through bond subscriptions. The cash-flow would have a high compensation rate of 7 to 8 percent. In addition, the plan facilitates credit flows to small and medium businesses."

But Boeri said "the banking reform plan comes too late. Six months after the Lehman Brothers' crack, it might not be enough to resist the Italian credit crunch."

"There are two main problems with the banking reform plan," he said.

"First, 10 billion Euros of cash-flow envisaged by the government are not enough. Second, these measures can help in reducing cash-flow needs, but not banks' insolvency risks. Also, the reform plan does not take into consideration unemployment benefits. Hundreds of thousands of jobless Italians receive no financial support from the state," he said.

Professor Boeri believed "bank nationalization is an hypothesis to evaluate case by case but better avoid talking too much about it."

"Nationalization of financial institutions should only be considered as a temporary measure of emergency," he said, adding that "personally I hope there will be no need to nationalize any bank."

(Xinhua News Agency March 8, 2009)