Italy is nearing a Cyprus-style depression that could trigger a global economic meltdown.

The Mediterranean country, whose GDP is still 8% smaller than before the 2008 financial crisis, is drowning under bad bank debts which equal about one-fifth of its GDP.

The Italian government is reportedly considering using taxpayer funds to “bail in” banks – surpassing already draconian EU banking rules – to protect politically-connected, wealthy households that own almost half of the bank junior bonds instead of forcing them to take the burden.

“This would explain why the Italian government is so hell bent on using taxpayer funds from the get-go to bail out the banks,” Joseph T. Salerno of mises.org pointed out. “Let us consider the ‘small savers’ whom the Italian government is so eager to protect: In 2013, net wealth of the median Italian household was 145,469 euros, including real and financial assets.”

“It is hard to believe that a household which was savvy and disciplined enough to accumulate this amount of net wealth would be so naive as to rashly invest almost one quarter of it in risky junior bank bonds, especially considering that total bank bonds constituted around 3% of gross household wealth in 2013.”

In other words, the general public would suffer the most.

Cyprus similarly ripped off the general public to protect the financial elite in 2013 when the country pillaged people’s bank accounts as part of a “bail-in” program with the International Monetary Fund and the European Central Bank after Cyprus’s largest bank went under from exposure to debt-crippled Greece.

“If you can do this once, you can do it again,” financial analyst Lars Seier Christensen warned at the time, adding that “bail-ins” are full-blown socialism. “If you can confiscate 10% of a bank customer’s money, you can confiscate 25, 50 or even 100%.”

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