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Milan Shares End Sharply Lower

July 20, 1992

MILAN, Italy (AP) _ Bleak news reports, including a corruption scandal and a Mafia murder, helped pound Milan share prices in frenetic trading Monday.

The provisional MIB index was down 5.12 percent. At its lowest point, the index had registered a drop of 7.7 percent in mid-morning trading.

Traders and analysts offered several reasons for the plunge, capped on Sunday by the murder of leading anti-Mafia Judge Paolo Borsellino in a car bomb explosion in Palermo. The assassination followed by two months the murder of key Mafia fighter and national hero Giovanni Falcone when a bomb exploded under a highway outside the Sicilian capital.

″Italy is just becoming a country to get out of. Not only for the economic problems, but there seem to be risks to basic freedoms,″ said Marco Nascimbeni, an analyst with Milan-based securities house Pasfin SpA.

″It seems like Italy is becoming an ungovernable country,″ Nascimbeni said.

But traders noted that the assassination hit a market already demoralized by a hike in Italian interest rates and fears that rates will rise even higher as the Bank of Italy struggles to defend the embattled lira.

They say a 0.75 point hike last week in the Bank of Italy’s official discount rate to 13.75 percent has already eaten away some 15 trillion lire, or about $13.6 billion, out of the 30 trillion lire the government hoped to save as part of a deficit-cutting package it unveiled earlier this month.

″We have already eaten up the economic plan we waited so long for,″ said Cristiano Esclapon, an analyst with Milan securities house Mercati Finanziari SIM.

The Bank of Italy’s move was a response to an 0.75 point increase in the German central banks’ discount rate loan fee to 8.75 percent.

Traders said that an ongoing corruption scandal that erupted in Milan six months ago and has spread to cities around Italy is ushering in painful changes.

″Now it’s clear you can’t run an economy by stealing, and this realization is a real brake on an economy made up of the circulation of dirty money,″ Esclapon said.

Construction magnate Salvatore Ligresti, who controls five companies listed on the Milan stock market, admitted over the weekend he had bribed politicians to win contracts for work on the Milan subway system, according to Italian news reports. More than 60 people have been arrested in the scandal so far.

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