NEGATIVE CONSEGUENCES OF INTERESTS ON LOAN TO SMALL ITALIAN COMPANIES Breaking up of big companies Italian creativityConsequences of the use of interest Conclusion Situation of Italian small companiesBanks situation Problem of italian companies Difficulties on financial markets

home SITUATION OF ITALIAN SMALL COMPANIES The italian economy is drirven by round about 6 milion companies. Most of them are micro, small or medium sized, which is an important difference from other european economies. During the previous years, this situation was generated by the following facts, which are: - the breaking up of big companies into small ones - Italian creativity and entrepreneurship

home BREAKING UP OF BIG COMPANIES Medium sized companies and big corporations tend to split into smaller companies to bypass the strict working legislation. Even before the process of outsourcing to Eastern Europe and China, Italian companies have begun to split the commercial activities from the manufacturing ones. The best example is the fashion industry, which tends to outsource the production to small and micro companies, many of which even nowadays have only one customer. This situation generates a dangerous economic and financial weakness.

home ITALIAN CREATIVITY Of course, this is a great pride for our country, but unfortunately it is not supported by sufficient professionalism and financial knowledge. Generally italians don't know much about the financial and the credit system; most of italian entepreneurs have little interest in the balance sheets of their Company.They like to produce, to think up solutions for new products. On the other hand they know very well how to save taxes. The advantage of this is that the smaller the company the less it has to invest into management and the lesser are the legal constraints; You can easily understand that workers are getting less guarantees in these conditions.

home DIFFICULTIES ON FINANCIAL MARKETS With the current difficulties on the financial market, the access to credit has become very difficult and expensive. Till some years ago the banks financed without any problem companies that could provide adeguate guarantiees such as real estate or other assets. These credits where given at low rates provided the company was able to give some guarantiees. Nowadays, the balance sheets have become much more crucial for the obtainment of a credit. For many years banks provided loans to those companies which gave higher guarantiees with low interest rates, and at higher rates to companies with less guarantiees (even at 8 to 9 percent difference). These smaller companies had to accept the bank conditions even if worse. Now the situation is not better. With the upcoming of the mergers between the banks which created big financial trusts like - Unicredit and Banca Intesa. – the small companies are experiencing major problems. On one side, these huge banking trusts where involved in the financial crisis more than the smaller banks, and they could not afford to give new risky loans. On the other hand, on the client's side, small companies had much less contractual power. The crisis made the latent financial problems of small companies come to surface, since the big banks did not renew the expiring loans, and even asked to anticipate the pay back.

home BANKS SITUATION Another important aspect is that banks had to follow the request of the central Bank, put in order their own financial situation, which they performed on the shoulders of their customers. Recently, newspapers have reported that Unicredit (the second largest Italian Bank) had already recovered their balance and improved its core tired. Instead of improving their service or by increasing the amount of customers, they just changed their credit policy, by refusing new loans to risky companies, and they reduced the payback terms (shorter loans). Eventually the banks are earning much more than they earned one year ago; their spread is higher now than before: the difference between what they pay to the other banks (EURIBOR) and what they are paid by the clients has increased dramatically.

home PROBLEM OF ITALIAN COMPANIES The major problem of Italian companies is the lack of capital, which becomes a big weakness in a moment of reduced support from the financial market. The high interest rates paid by the economy only enriches the banks without helping a balanced development or people in distress.

home CONSEQUENCES OF THE USE OF INTEREST 1- The banks don't invest in industrial progress. The interest paid enrich a very small portion of people (generally already rich). These few have the economical, financial and political power in their hands. 2- The banks invest the interests they earn into dangerous financial products and they sell these products to the same people who pay these interests (so the banks earn many times from the same person) 3- Power rising for very few individuals 4. Social frictions 5- Impoverishment of the economical system, as companies have no funds to invest. 6-Excessive delays in payments to suppliers, because the banks have to be paid first. 7- Minor employment because of low liquidity of the companies 8- Lower quality of products and services because of reduced workforce and resources 9- Higher prices of goods and services

home CONCLUSION As we have seen the interest that the companies pay to the bank don't give much wellness or richness to the environment, but the bankers use it to increase their own profit.