Mario Monti, the saviour of Club Med, is walking and Italian bond yields are waving him off. Here are the 10-year and 30-year BTPs, with dramatic spikes:
Italian Prime Minister Mario Monti has called for a doubling of the eurozone bail-out fund to 1tn, according to a report in Der Spiegel citing unnamed sources. The story says Mario Draghi supports a similar increase. However German finance minister Wolfgang Schauble on Sunday rejected the calls to boost the European Stability Mechanism in a television interview, says the WSJ, saying Europe must first implement the decisions made at the December summit of leaders before coming up with fresh demands for more cash. Mr Monti on Sunday also sought to reassure his government was taking austerity plans forward, the WSJ reports separately, saying on state television that plans to spin off Eni’s regulated natural gas business were going ahead. He said the government will introduce a decree within six months to detail the ownership split between energy companies Eni and Snam. There is no “delaying” on the government’s part the decision to force Eni to sell its stake in Snam after Friday’s measures to compel it to do so, Mr Monti said. The lapse of time reflects the fact that the companies are listed and have to meet market obligations, he said. Mr Monti also said he had “very high” expectations that eurozone countries would eventually agree to jointly issued bonds, although not before 2013. Read more
Italy’s prime minister has pleaded for Germany and other creditor countries to do more to help lower his country’s borrowing costs, warning there would be a “powerful backlash” among voters in the eurozone’s struggling periphery if they did not, the FT reports. In an interview just three days after his country’s debt was downgraded two notches by Standard & Poor’s, Mario Monti said he did not dispute the vast majority of the credit rating agency’s diagnosis of Italy’s problems. But he argued the agency’s analysis supported the tack he was taking both at home and in Brussels. He singled out S&P citing “one negative” political risk factor: “European policymaking and political institutions”, not his technocratic government. Rome would push the German government to realise it was in “its own enlightened self-interest” to lend more of its fiscal weight to lowering borrowing costs of Italy and other highly indebted governments. The single currency had brought “huge benefits …and maybe [to] Germany even more than others,” he said. Read more
Italy’s prime minister has pleaded for Germany and other creditor countries to do more to help lower his country’s borrowing costs, warning there would be a “powerful backlash” among voters in the eurozone’s struggling periphery if they did not. In an interview just three days after his country’s debt was downgraded two notches by Standard & Poor’s, Mario Monti said he did not dispute the vast majority of the credit rating agency’s diagnosis of Italy’s problems, the FT reports. Rome would push the German government to realise it was in “its own enlightened self-interest” to lend more of its fiscal weight to lowering borrowing costs of Italy and other highly indebted governments. The stance could put Mr Monti, whose appointment to replace Silvio Berlusconi was cheered by German chancellor Angela Merkel, on a collision course with Berlin. Ms Merkel has been reluctant to take more aggressive action to lower Italy’s euro-era high borrowing costs, such as supporting commonly-backed “eurobonds” or increasing the size of the eurozone’s rescue funds. Read more
Mario Monti has defended a tough crackdown on tax evaders in luxury ski and coastal resorts, rejecting angry reactions from leading members of Silvio Berlusconi’s centre-right party whose support in parliament is vital for Italy’s new government of technocrats, reports the FT. Finance ministry tax police followed up a well publicised new year raid on Cortina D’Ampezzo in the Dolomites with unannounced inspections over the weekend in Porto Fino on the Ligurian coast and other exclusive retreats. Mr Monti, who also serves as finance minister, responded forcefully at the weekend, congratulating the tax police for their efforts and taking issue with Mr Berlusconi’s oft repeated slogan that his centre-right coalition, which collapsed in November, had “not put its hands in the pockets of Italians”. The Telegraph reports Mr Monti also told a public broadcaster that Italy’s “banking system is not under threat” and that Rome may support a financial transactions tax, but only as an EU-wide measure. Read more
The price action in on Italian bonds on Monday, that is.
Italy’s new technocratic government has approved tough austerity measures and reforms including tax increases, pension changes and spending cuts amount to a savings of €30bn over the next three years, reports the FT. Mario Monti, prime minister, on Sunday night underlined the gravity of the crisis facing his country, but promised that the “multitude of sacrifices” he was implementing in his “Save Italy” decree would also be used to promote economic growth by reducing the cost of labour. About €10bn of the savings will be put back into the economy through measures to promote growth, including cuts in the cost of labour and incentives to get more women and young people into the workforce. The government’s first macro-economic forecasts project a fall in Italy’s GDP in 2012 of 0.4 to 0.5 per cent and zero growth in 2013. The measures are in a single emergency decree that allows them to take effect immediately, before formal parliamentary approval, but Mr Monti will have to secure the backing of legislators within 60 days for them to remain in force, says Reuters. Read more
Leading players in the eurozone debt negotiations – Angela Merkel, Nicolas Sarkozy, Mario Monti, Mario Draghi, and Herman Van Rompuy – seem to be singing from the same song-sheet ahead of next week’s summit, says the FT. Essential details, however, are still the subject of intense negotiations that could run right up to the EU summit on December 9, not just between France and Germany, but with the European Commission – the EU executive – and smaller member states. The deal involves accelerated agreement on what Mr Draghi described on Thursday in the European parliament as a “fiscal compact” between the 17 eurozone members to enforce much stricter budget discipline and debt control throughout the monetary union. The other two elements are agreement on a reinforced firewall to prevent contagion from one eurozone country to the next; and tough national measures in the most debt-laden states to restore confidence in the markets. Mr Draghi’s blessing for the three-pillar combination is critical, and the ECB president hinted in his Thursday speech that the “fiscal compact” could pave the way for a more agressive ECB approach, reports the FT separately. Read more
The IMF is considering an “Italian programme” of €400bn to €600bn to help Italy, says Italy’s La Stampa. The newspaper, citing unnamed officials, says the IMF wants to give the country’s new prime minister, Mario Monti, 12 to 18 months to enact reforms, and is discussing a fund that would lend to Italy at 4 – 5 per cent, rather than the market rates which reached 8 per cent last week. The Telegraph says that the fund may also offer credit to Spain to protect it from being “picked off” by savage markets.
The leaders of Germany, France and Italy, the eurozone’s three biggest powers, made tougher fiscal governance a top priority in their battle to stem the sovereign debt crisis but offered no immediate concessions to calls for intervention by the European Central Bank, the FT reports. Their emphasis on structural change to stabilise economic performance left markets unimpressed. The euro fell from $1.338 against the dollar at the start of the leaders’ press conference to a low of $1.332, while stock markets across Europe gave up earlier gains. German chancellor Angela Merkel and Mario Monti, the new Italian prime minister welcomed eagerly into the fold, in contrast to the near shunning of his predecessor Silvio Berlusconi, spoke of creating a “fiscal union” to drive economic integration and enforce budgetary discipline. Ms Merkel made clear that she wanted ambitious steps enshrined in treaty before contemplating the issuance of commonly backed eurobonds, any early discussion of which she has dismissed as “inappropriate” in a crisis. Read more
This pic begs a caption competition:
Mario Monti, the Italian prime minister-designate, was poised to announce his new cabinet on Wednesday after formally accepting the post form President Giorgio Napolitano, reports Bloomberg. This comes after of two days of talks with Italy’s political leaders aimed at gaining support for a largely technocratic government that will push through austerity measures in order to reign in the country’s borrowing. Yields on the sovereign’s 10-year bonds fell below 7 per cent in early trading. Meanwhile, Bloomberg also reports that the Greek prime minister Lucas Papademos, whose government has been in office for just six days, faces a confidence vote today. The vote will give Papademos a three-month mandate to move forward with budget measures and ensure the much-delayed disbursement of €8bn of funds that form part of the country’s previously agreed bailout package. Read more
Breaking on Monday morning…
RTRS-ITALY HAD TARGETED AMOUNT OF BETWEEN 1.5 BLN AND 3 BLN EUROS AT 5-YR BTP AUCTION Read more
Spotted on Il Sole 24 Ore over the weekend — the official Italian government reply to Olli Rehn’s little inquiry about reform:
Berlusconi ‘ready to pull plug’ on Monti – FT Read more
Mario Monti was handed the task on Sunday night of forming an emergency government led by technocrats as Italy’s head of state raced to win broad political consensus before financial markets opened on Monday, the FT reports . Giorgio Napolitano, the 86-year-old president, who has been instrumental in guiding Italy through its political crisis, formally asked the unelected Mr Monti to take charge less than 24 hours after Silvio Berlusconi resigned as prime minister after parliament’s approval of some reforms demanded by the EU. Italians took to the streets to celebrate the demise of the sporadic cruise ship singer, the WSJ says. All eyes will now turn back to that other Mario, Draghi, when markets open on Monday, according to the Telegraph. Tyler Cowen has an idea to stop all this nonsense: Italians should use their wealth to just buy Italian bonds. (FT Alphaville was there first, of course.) Read more
Silvio Berlusconi is losing his grip on his own People of Liberty party in what are likely to be his last days in office dominated by an internal dispute over whether to push Italy into early elections or back an emergency caretaker government led by Mario Monti, former European commissioner, the FT reports. The emerging rift threatens to destroy what had been Mr Berlusconi’s hopes of leaving a lasting legacy in the shape of one party dominating the centre-right of Italian politics. More immediately it could delay a quick resolution of Rome’s political crisis demanded by panicking investors and European partners. The prime minister broke more than a day of silence on Thursday night since insisting on Wednesday that the only option after his resignation was to hold snap elections. Political sources say Mr Berlusconi has changed his mind and would now give a green light to Mr Monti, the newspaper says. Reuters reports Italian 10-year bond yields fell back below the red line of 7 per cent from 7.6 per cent on Wednesday, a level seen as unsustainable in the long term, amid signs that the political deadlock was easing. Rome paid less to sell 1-year treasury bills than many had feared. Read more
Although there’s a tiny amount of breathing room… Read more
First, a pictorial trip down memory lane.