Italiaanse crisis #3: Stilte voor de shitstorm.

Italy Bond Yields Spike as Rome's Budget Clash Stirs Echoes of EU Debt Crisis

Alternatieve titel.
Capital flight from Italy accelerated in August. The morning the yield on 10 year govt bonds reached a new peak since the current administration was formed, hitting a 4.5 year high. All happening as Rome-Brussels relations deteriorating and ECB moves to wind down bond purchases.

Italy's benchmark borrowing costs hit a four-and-a-half year high Tuesday as investors continued to trim government bond holdings amid concern that the country's populist administration is on a collision course with EU officials in Brussels that echoes the worst of the region's 2012 debt crisis.
Martin Baccardax
Aug 28, 2018 4:55 AM EDT

Italy Bond Yields Spike as Rome's Budget Clash Stirs Echoes of EU Debt Crisis
Italy's benchmark borrowing costs hit a four-and-a-half year high Tuesday as investors continued to trim government bond holdings amid concern that the country's populist administration is on a collision course with EU officials in Brussels that echoes the worst of the region's 2012 debt crisis.



Italy's Deputy Prime Minister Luigi Di Maio told the Il Fatto Quotidiano newspaper Tuesday that his government could breach the EU's 3% deficit target next year as it spends billions more than anticipated in order to meet various election commitments. The outlay is also expected to include billions more for improvements in Italy's road and transport infrastructure following the deadly collapse of a busy commuter bridge earlier this month that killed 43 people in the northern city of Genoa.

Rome has also clashed with Brussels over the handling of migrants, mostly from Africa, landing on Italian shores as part of an overall crackdown on immigration by the right-of-center Interior Minister Matteo Salvini, who has accused the EU of shirking its responsibilities.

The clashes suggest the government, a coalition of the leftist Five Star Movement and the anti-EU League Party, could draft a 2019 budget plan that would add around ¤100 billion ($116 billion) to the country's staggering ¤2.3 trillion debt pile and create a budget deficit that's as high as 5% of GDP for the coming year, a figure that would be more than six times the previous target agreed with Brussels.

Dan O'Brien
@danobrien20
Capital flight from Italy accelerated in August. The morning the yield on 10 year govt bonds reached a new peak since the current administration was formed, hitting a 4.5 year high. All happening as Rome-Brussels relations deteriorating and ECB moves to wind down bond purchases.



The debate has pushed benchmark 10-year Italian government bond yields to 3.209% in early European trading Tuesday, the highest since March 2014, while Italy's FTSE MIB stock index fell 0.85% to extend its decline since the new government was first established in late May to around 15%.

In fact, the extra yield, or spread, that investors demand to hold Italian government debt instead of paper issued by Spain, has risen to 1.76%, the highest since the peak of the region's 2012 debt crisis. The spread to triple-A rated German bunds was quoted at 2.82% Tuesday, an astonishing gap in borrowing costs between the region's first and third-largest economies.

Italy's swelling budget deficit -- as well as its dangerously high debt-to-GDP ratio of 132% -- suggest its 2018 growth rate of 1.2% could be difficult to achieve should investors dump domestic assets amid the ongoing tension between Brussels and Rome. Business sentiment in the manufacturing sector, for example, hit a 20-month low of 104.8 this month, according to ISTAT, Italy's national statistics office, ISTAT, in data published earlier Tuesday.

Italy's banks are also lumbered with more than ¤383 billion in government bonds, according to European Central Bank data published today, after having increased their holdings for each of the past seven months. Foreign investors, meanwhile, have dumped more than ¤58 billion in June and July.

Italy's sovereign debt pile is more than ¤2.3 trillion, all of it denominated in a currency that it has to earn or borrow. That has made the pile nearly impossible to reduce, given the country's poor productivity, which has contributed to three recessions since the global financial crisis in 2008.

However, for a host of reasons, global investors have either been insulated from Italy's political and economic failings either by the European Central Bank's myriad liquidity efforts or its vow to do "whatever it takes" to save the euro from an existential attack in foreign exchange markets.

That said, should contagion take hold and Italy's bond yields rise to the 7.3% peak reached during the height of the region's sovereign debt crisis in late 2011, European officials could be forced to deploy one -- or both -- of their most powerful backstops: the European Stability Mechanism (ESM) or the the ECB's Outright Monetary Transactions (OMT).

The ESM, a centrally controlled rescue fund backed by around ¤700 billion in paid-in capital from Eurozone member states, has around ¤400 billion left over from previous loans to Greece, Portugal, Ireland and Cyprus and would likely fail to stablize markets should Italy's $2.5 trillion economy require a significant bailout.

That could leave European Central Bank President Mario Draghi as Italy's lender-of-last-resort.

Draghi is the principal architect of the Outright Market Transactions, or OMT program, an untested "bazooka" of central bank firepower that can buy unlimited amounts of government bonds in the secondary market in order to prevent an "unwarranted" tightening of any country's fiscal mechanics.
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Al die lemming/domoor Eurofielen moeten eerst eens leren na te denken Hoe de markt werkelijk in elkaar zit, Je zou ze bijna verplicht naar school sturen (omdat ze er niks van hebben begrepen).

Italië is geen ene ruk opgeschoten met de invoering van de Euro. Het is de slechtste preformer van de G7 (by far). En alle stoplichten staan flink op rood. En Kapitaal blijft niet in Italië liggen.

Sterker nog. De crisis van 2008-2012 is nog immer waar en bijzonder actueel. En er is vrij weinig wat de ECB nog kan doen. Om Italië drijvende te houden zou Nederland per jaar ongeveer 21 miljard moeten pompen in een fail-state. Lees goed geld tegen slecht geld te gooien. Italië zou wel eens hoofdstuk 0.1 kunnen worden van het einde van de EU.

quote:

Op woensdag 29 augustus 2018 09:46 schreef nixxx het volgende:
Ik vind het eigenlijk verbazend dat er nog instanties zijn die geld lenen aan Italië, tegen wat voor rente dan ook..

Ik snap al die idioten niet dat de euro ons voorspoed heeft gebracht (In noord Europa wellicht.) In zuid Europa zitten ze de verkeerde kant van het spectrum. ==> Er is helemaal geen convergentie van economieen. In het verleden niet, nu niet, en in de toekomst ook al niet.

Volgen jullie het nieuws wel.

‘Fear factor’ threatens Italy as shaky economy puts markets on edge, warn analysts

Investors are losing faith in the Italian economy and could cut back spending and hiring for fear of worse to come, analysts have warned.

Markets are worried about surging public debt as the government looks to launch a spending spree with a “fear factor” holding back trading, Citigroup warned.

Combined with slower growth, political uncertainty and the challenges of an ageing population, this makes the country vulnerable to financial instability.

Italie is fucked. Zit te wachten op de EU-fiederatie-fielen die ik een snoeihard een kopje kleiner kan maken.

D66 is het as van het kwaad. Op het moment dat we de rente moeten gaan betalen oven Italiaanse leningen zijn we in Nederland 21 miljard per jaar kwijt. Not done. Daarom zal de federatie in de huidige omvang er nooit komen.

quote:

Op woensdag 5 september 2018 11:32 schreef Black_Baron het volgende:

[..]

Dit soort anti EU geneuzel vind ik dus onzin om te lezen en maken het topic voor mij minder interessant.
Je lezers haken hierdoor af.

Onderbouwing staat in deel #02.
Als je Target 2 doorbrekend na debt. Is de ratio niet 132 %. Maar eerder 180 %.

Er zijn gewoon te weinig verbeterpunten. De markt is aan het side-betten. Investeerders haken af.
Best knap voor een 3e EU land in verval.

Italy must present a “credible budget” for the coming year, EU Commissioner Pierre Moscovici said on Thursday, calling the anti-establishment government in Rome a “problem”.



Moscovici, who runs the commission’s economic and finance portfolio, also called on Italy to cut debt and push economic reform instead of deepening deficits, AFP reported.

The Italian government’s budget plan for next year needs to be “credible in terms of numbers” but also in terms of “structural efforts”, Moscovici said. “Italy’s economy needs reforms,” he told reporters. “Stopping reforms and printing money instead is not going to save Italy.”

Rome’s debt currently stands at a towering 132% of gross domestic product, making Italy’s the second largest debt ratio in the eurozone after Greece.

But the anti-EU government in Rome, which brings together the far-right League party and the anti-establishment Five-Star Movement, is under pressure to meet electoral pledges and boost spending instead of slashing its deficit, as promised by the previous government. Ministers must deliver their budget proposal to the European Commission by October 15.

“What we are now waiting for is facts,” ECB chief Mario Draghi commented on Thursday. “Words in the last few months have changed many times.”

The fragile state of Italy’s economy has reawakened memories of the debt crisis, and Italy risks punitive measures by its EU partners if it insists on breaking bloc rules on running excessive deficits and high debt.

“Unfortunately, we’ve seen that words have created some damage and interest rates have gone up” for households and firms, Draghi said.

But he acknowledged the more recent soothing noises that have come from Rome. “The Italian prime minister, the Italian minister of economy and the Italian foreign affairs minister have all said that Italy is going to respect the rules,” Draghi noted. “And by the way, all this hasn’t created much of a spillover to other eurozone countries, so it’s remained at least so far pretty much an Italian episode,” he added.

But Moscovici warned that the EU would continue to watch closely. “There is a problem and it’s Italy,” he said. “I will be concentrating on Italy more than on anything else.” Italian growth is at the bottom of the eurozone range, and the country’s weak productivity is a “massive problem”, the commissioner said.
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EU == schuldenfabriek. Dit is ground zero.

quote:

Op zaterdag 15 september 2018 23:30 schreef john2406 het volgende:
Al herhaal je het nog zo vaak, op het eind van de rit krijg je zoiets DH!

Johma Gevuld Eitje Commercial 2018

Zal me een rotzorg wezen. Ben benieuwd of Italië de EU rit gaat uitzingen van 30 jr stagnatie.
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Ik denk het namelijk niet.