Skip to comments.Italy borrowing costs hit record 7%
Posted on 11/09/2011 2:40:36 AM PST by AnAmericanAbroad
Italy's cost of borrowing has touched a new record, a day after Prime Minister Silvio Berlusconi said he would resign once budget reforms are passed.
The yield on Italian 10-year government bonds reached 7%, the highest since the euro was founded in 1999.
The debt was pushed up as a clearing house asked for a larger deposit to trade Italian bonds - to cover the increased risk of non-payment.
Investors fear that Italy could become the next victim of the debt crisis.
(Excerpt) Read more at bbc.co.uk ...
We’re so fooked.
Futures are fugly. I sold some stocks yesterday and was intent on buyng others but didn’t hit my price. It looks like I’ll have a better entry point if I choose.
This is just plain nuts.
But that's exactly what they're doing by turning the PIIGS into the equivalent of zombie economies who must spend all the wealth created on repaying debt and supporting government.
In the relatively healthy parts of Europe, the banks have drastically tightened credit to build capital for the inevitable defaults. That is slowing down Germany's economy.
It just looks terrible all the way around.
Things are getting ugly everywhere.
I agree that the stronger countries really need to get the PIIGS out of the EU. In principle, the EU isn’t so bad of an idea, but with the caveat that the economies are essentially equal in most respects. And there’s the problem.
Many (here on FR, economists, heck even some DU’ers) have proposed a two-tier EMU.....one for the countries that can make currency work, and one for those who can’t. While there may be some merit to that notion, for me it’s easier just to throw out those who shouldn’t be in the club. Of course, there’s no mechanism to do this, another problem.
Instead of turning the PIIGS into zombie economies, perhaps the EU should try focusing their attention on creating a means to exclude them.
Or barring that, then they should dissolve the EMU and go back to their previous currencies.
I always like reading Tyler Durden. Thanks.
Are you in In Italy? Just curious what you hear on the ground about Berlusconi.
Who’s that playing piggy in the middle?
If they kick the PIIGS out of the EU, the PIIGS default on the bonds which are in French and German banks, and those banks go down, possibly dragging down the French and German economy.
This is the sensible way to go.
If the PIIGS stay in, then they will have to print Euro’s to cover all of PIIGS debt payments.
I’m betting on the latter.
Wow. I didn’t recognize him without Pootie-Poots’ hand up his....er, well, never mind. All I could think of was Liev Schreiber :-)
I’m in the Czech Republic.
The Czechs view Berlusconi the same way they view their own Czech politicians.
In other words, with contempt.
I’m betting on the latter as well.
Despite the occasional tough noises from Merkel and Sarkozy, at the end of the day, they’ll maintain the status quo. Even though it’s disastrous.
Looks like Medvedev knows how to party like he’s Boris Yeltsin!
Seriously.....he looks completely tanked.
Several things that many people seems to ignore about Italy:
1) A founding member of the european community.
2) A net EU net payer (unlike the other “PIIGS”). They pay net 5 billion euros to Brussels every year. In a period of 6 years, each italian pays net 780 euros to Brussels (each frenchman pays net 800 euros; each german pays 1200).
3) The second european exporter of manufactured goods (excluding energy and raw materials), ahead of France and UK and only behind Germany. The province of Turin exports more than Greece.
4) Unemployment rate of 5% in the centre and northern regions.
5) Their international investment net debtor position is around 25% of GDP. Much better than the 90-100% in Greece. Portugal, Spain and Ireland.
6) Private debt is sustainable. The public debt is an old issue: it´s above 100% of GDP since the 1980s. A consequence of many years of consecutive budget deficits around 10%, from 1981 to 1993 (sounds familiar??)
7) There are no objective arguments to explain this brutal speculative attack against Italy. Other than the weakness of the government and distrust on Silvio Berlusconi. Once president Napolitano appoints a technical government led by Mario Monti (endorsed by Brussels and Germany) the italian risk will decrease drastically. It´s a matter of 10 days.
This one is especially funny...
You know, in one sense, I really can’t blame them.
Say you were a leader of one of the G20 countries. Naturally, you’d be privy to information that the rest of us don’t have. I suspect (and it’s just a suspicion) that they know damn well it’s all coming apart. In other words, a SHTF moment is coming down the pike pretty soon. There’s nothing they can really do to stop it; they can slow it down it a bit, perhaps, but not completely prevent it.
If I were in their shoes, I’d probably be raiding the mini-bar myself. Maybe flirt with some cute French cocktail waitress.
If it’s all going down, might as well have yourself a dry martini (shaken not stirred, of course) and enjoy the ride.
Jeez, in that one he looks like Simon Cowell. Medvedev is the invisible man.
You make excellent points, and I hope that your conclusion about a technocrat government appointed by President Naplitano is correct.
Unfortunately, logic doesn’t always move markets. Quite often, it’s emotion based. Even though I didn’t always agree with former Fed chairman Greenspan, I do agree with his observation about “irrational exuberance.”
It works both ways; in this case, hysteria. There’s the market’s perception (and cultural stereotype) of typical post WW2 Italian politics, i.e., bumbling, corrupt, fractious and inept.
There is a significant divide between Northern/Central Italy and the South. The North/Central regions are actually doing well; it’s the South that’s the overall drain on the rest of the country.
And shortly after this photo was taken, did Silvio and Dimitry go to a bunga-bunga party?
What happens in London, stays in London.......
Do you not think Italian bondholders watching Greece bondholders being forced to agree to take a 50% haircut would have a significant risk of exposure to a similar fate on Italy’s $2.6 trillion debt? I would think a $1.3 trillion haircut exposure would make me want a much higher bond rate yield to entice me enough to buy Italian debt, JMO.
The post-WW2 italian political crisis is at least 50 years old: a different government each year, with no real alternation (since the largest left-wing party was communist: mainstream parties corruption was publicly uncovered only after the fall of Berlin Wall). I hope this will change. One of the reasons of Berlusconi being voted was that he brought something similar to a two-party system.
In any case, even if italian risk drops, the financial crisis will go on. They would likely target Portugal or Ireland again, or Spain (22% unemployed) or add a new country like Belgium, which suffers from some “italian” issues (regional dualism, high public debt, political instability).
"Ask it, Professor."
"You are rich?"
"Immensely rich, sir; and I could, without missing it, pay the national debt of France."
- "Twenty Thousand Leagues Under the Sea" by Jules Verne
Well cash flow doesn’t lie, they either are deficit spending or they are not. And if they are not, can they and will they increase tax revenues to cover the deficit? Or reduce spending for the same result?
FWIW, thanks for pointing out that the northern area of Italy is like the red states area of USA. Productive and hard working. Southern part is the problem from what I can recall.