Italy’s Political Woes Spell ‘Nightmare’ for BNP, Agricole

BNP Paribas SA and Credit Agricole SA, France’s largest banks by assets, are finding that their pursuit of growth in neighboring Italy in the past decade has a downside: political risk.

As the world’s biggest foreign holders of Italian public and private borrowings -- with $416.4 billion of such debt at the end of June -- French lenders face collateral damage from the political turmoil that sent Italy’s bond yields to euro-era records. Austerity measures to balance Italy’s budget are also threatening growth in an economy that has lagged behind the European average for more than a decade, and may hurt the French banks’ consumer businesses.