When the mafia becomes a credit bank

When the mafia becomes a credit bank

The investigators of the financial police of naples jolted out in early august in a blue light convoy. Officials arrested two suspects in the outskirts of the southern italian city. The accusations: loan usury with mafia methods and extortion.

About 550.000 euros had been borrowed by family entrepreneurs from the tourism sector from the criminals years ago, as the authorities reported. Because of the shortfall caused by the corona crisis, they could no longer pay their 5500 euros of interest per month. Lenders threatened to take over operations. The entrepreneurs then provided the mafia managers with important tips for the investigation.

In this case, a number of things went wrong from the point of view of the criminals. But many affected entrepreneurs do not dare to call the investigators on the plan. And the corona crisis could aggravate the problems with the mafia.

Italy’s economy, number three in the EU in terms of gross domestic product, urgently needs liquidity after the covid shock. Politicians and experts are already sounding the alarm that lack of money could drive even more companies into the clutches of mafia gangs. The clans, with their billions in income from drug trafficking, mull and arms deals, are ready to pump gross sums of money into regular circuits.

It is well known that ‘ndrangheta, camorra and other groups run bars, cafes and gambling houses. But the corona crash now also provides the fertile ground for them to become a kind of alternative credit bank for medium and large companies, according to the horror vision. With the ruby image of a cinema "godfather" like don vito corleone of former times this has little in common, it is rather about the type bank manager with interest calculator.

Such a scenario for "modern mafia models" was outlined by the anti-mafia agency DIA in mid-july in its semi-annual report. "For some time now, it has been possible to observe a tendency for mafia organizations to avoid spectacular actions," hieb es. Quietly and secretly "direct their attention to entrepreneurial areas" to use their capital.

In the first step, they focus on the old strongholds in the south. There they want to "devour the weakest companies". In a second, medium- to long-term scenario, the powerful ‘ndrangheta from calabria, in particular, plans to act even more strongly "as a "global player" that is reliable and effective".

For over-indebted firms struggling with cash shortages, bureaucracy and banks are too burdensome, says standard complaint in mediterranean country. That’s why quick cash injections despite illegal origin find buyers.

Such criticism of the state knows interior minister luciana lamorgese. She used to be a top official. The politician has repeatedly warned against the strengthening of the clans. In presenting her security report in mid august, she called the corona emergency "a special time because organized crime and the mafia can react quickly and penetrate the legal economy".

For many companies in italy, the situation was already very difficult even before the pandemic, with more than 35,000 jobs lost.000 dead wobbly, as analyzed by international credit insurer coface. Although the companies had been able to reduce their share of debt by 2019 compared with the high point in 2011 – after the financial crisis of 2008. Nevertheless, "with a debt ratio of 50 percent, companies in italy are now the most indebted among the rough european economies," write the experts. In addition, some sectors have hardly been able to convert their loans into innovation and future value. Retail, construction and small textile manufacturers highly vulnerable, he said.

The fact that italy’s gross domestic product plunged 12.4 percent in the second quarter of 2020 compared to the first quarter doesn’t make an early recovery any more likely. Nevertheless, there are signals that a strengthening of the mafia due to the virus crisis does not have to be an automatism.

As a result of the financial crisis from 2008, a mafia upswing had been observed. Marcos carias, a southern europe expert at coface, points out the differences, however: back then, the crisis started in the banking sector. "A huge and persistent credit crunch created the space for dirty money to gain market share. At the moment, things are very different: we have a crisis that is starting in the real economy, and the banks have responded with aggressive credit expansion (…)."The public liquidation aid had also played its part.

The heavily indebted state has launched several billion-dollar financial programs since the spring. For example, the EU recently approved aid of around two billion euros for guarantees in the insurance market for corporate loans. And the country’s banks significantly expanded their lending to businesses in june – by 3.7 percent compared to the previous year’s figure. This, too, can help prevent the mafia from gaining even more ground.

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