No sooner had Italian stocks soared and bonds tightened (sic) on early exit polls suggesting Pier Luigi Bersani’s centre-left Democratic party might have secured victory in both the lower and upper houses of the Parlamento Italiano, than…
On a generally crappy day for equities and bonds across all the big western markets, Italian stocks stood out:
Eye-catching charts, for a type of risk that should catch investor eyes:
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
Something to hang on the toilet wall, Silvio?
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.
More EU pantomime on Wednesday:
Take one, via Reuters: Read more
Just to put the boot in on the historical analogies…
The Evening Standard of Londinium, AD 2011: Read more
And now for some light relief as the Italian bond market goes under…
As the self-declared Napoleonite met his Waterloo yesterday, FT Alphaville is wondering how Silvio will be characterised in the annals of history. Read more
Silvio may be going but Italy remains front and centre of the Euromess.
On Tuesday evening, Olli Rehn, the EU’s economic and monetary commissioner presented Giulio Tremonti, Italy’s finance minister, with a detailed set of questions on the emergency austerity package passed in September that aims to eliminate the country’s budget deficit by 2013. Read more
Italy’s embattled prime minister pledged on Tuesday night that he would resign after parliament passes a new financial stability law that will implement fresh austerity measures demanded by the EU. The FT reports Giorgio Napolitano, head of state, said Silvio Berlusconi had expressed his recognition of the “urgent need” to respond quickly to the expectations of Europe through the approval of the stability law, which would be amended in light of the most recent recommendations of the European Commission. Mr Berlusconi said he would consult with leaders of the country’s political parties over the next steps to be taken after his resignation. Asian shares rallied and the euro steadied on optimism that Italy would proceed with reforms, reports Reuters. But the FT says the announcement leaves open the possibility of Italy heading to elections early next year – possibly giving Mr Berlusconi a second lease of life.
Silvio Berlusconi, Italy’s embattled prime minister, signalled on Tuesday night that he would resign after parliament passes a new financial stability law that will implement fresh austerity measures demanded by the European Union, the FT reports. Giorgio Napolitano, head of state, said Mr Berlusconi had expressed his recognition of the “urgent need” to respond quickly to the expectations of Europe through the approval of the stability law, which would be amended in light of the most recent recommendations of the European Commission. “With my exit from parliament, the pressure is now on the opposition to pass this stability law with urgency,” Mr Berlusconi said in a phone call to an Italian television station. “This law must contain an amendment containing the measures the EU … has requested.”
… to explain Tuesday’s morning’s price action in European equities, which have moved higher in spite of rising Italian bond yields.
First, a pictorial trip down memory lane.
Political risk jumps the shark, or Silvio Berlusconi’s Facebook page:
Italian government bond yields have breached record highs amid political crisis in Rome, FT Alphaville reports. Ten-year bond yields topped 6.5 per cent while the two-year yield rose to 6.3 per cent in early European trading. Italian Prime Minister Silvio Berlusconi has haemorrhaged support from his own party, ahead of a key vote on reforms on Tuesday, Reuters says. Mr Berlusconi is under intense external pressure to end months of procrastination over measures to cut Italy’s $2,600bn public debt. Delegations from the European Commission and IMF are expected in Rome over the coming week, according to the FT.
The restaurants are full, the planes are fully booked and the hotel resorts are fully booked as well.
While in the bond market… Read more
Time appears to be running out for Silvio Berlusconi’s centre-right government amid speculation that Italy’s prime minister could be forced to resign within weeks or even days despite his insistence that he has the support in parliament to fight on, writes the FT. Against this backdrop of deep political uncertainty, officials are anxiously awaiting the opening of markets on Monday following a sharp rise to euro-era highs of Italy’s bond yields on Friday because of disappointment with the inconclusive outcome of the G20 summit in Cannes. Disturbingly, Reuters says that Berlusconi has been forced to play with carrots and sticks to appease plotters. Not to worry though, the FT reckons the G20 will meet again soon, and Nicolas Sarkozy is planning his own round of additional budget cuts.
Silvio Berlusconi was put on notice at the G20 summit that Italy had to regain its credibility on debt markets even as promised reforms risk falling victim to clashes between the prime minister and his finance minister on top of a growing revolt within their centre-right party, the FT reports. Italy’s debt crisis dominated a pre-summit meeting of eurozone leaders and top EU officials in Cannes on Thursday. A European official said a two-hour meeting, attended by Mr Berlusconi and his French and German counterparts, Nicolas Sarkozy and Angela Merkel, focused on how Italy could win back market confidence. “It was very much about Italy,” the official said of the meeting. “We have a package that goes a long way, but we don’t have the confidence of the market.” As the meeting progressed, the yield on Italian bonds rose to a euro-era high of 6.4 per cent while the spread over German Bunds peaked at 462 percentage points before narrowing later. Analysts warn that Italy – with total public debt of €1,900bn – risks spiralling funding costs that would force it to follow Greece, Portugal and Ireland in seeking a bail-out for which the EU does not have adequate firepower in place.
Silvio Berlusconi failed on Wednesday night to overcome internal government divisions and push through immediate legislation on structural reforms ahead of Thursday’s G20 summit, the FT reports. Italy’s prime minister had hoped to have a decree agreed by the cabinet in his hands to take to Cannes and to calm markets that have pushed Italian bond yields close to euro-era highs. But government sources said disagreements between Giulio Tremonti, the finance minister, who is insisting on fiscal discipline, and Mr Berlusconi, who was backed by other ministers, prevented a deal from being reached. Instead of a decree that would have entered into law almost immediately with the signature of the head of state, officials said the cabinet agreed to introduce certain measures into a financial stability law that is already before the Senate but could take two more months to be approved.
Italy’s prime minister was fighting on Tuesday night to stave off a collapse of his centre-right coalition government over European Union demands for more concrete economic reform measures in time for Wednesday’s highly anticipated summit of eurozone leaders, the FT reports. The demand came as European officials attempted to reach a final agreement on giving the eurozone’s €440bn rescue fund more firepower so that it can assist Italy by purchasing Italian bonds, lowering Rome’s borrowing rates, which are near 6 per cent. While such EU assistance falls well short of a full-scale Italian bail-out, senior European officials said it would come with tough new conditions, and that the demands on Silvio Berlusconi were the beginning of a more intrusive effort by Italy’s eurozone partners to ensure Rome convinces the financial markets it is sincere about fiscal reforms. Talks early on Tuesday between Mr Berlusconi and his Northern League coalition partners failed to resolve the deadlock – centred on proposed pension reforms – after inconclusive negotiations the night before.
European negotiators have asked Greek debt holders to accept a 60 per cent cut in the face value of their bonds, a hardline stance that far exceeds losses agreed in a deal between private investors and eurozone authorities three months ago, reports the FT. The stance, delivered to a consortium of international banks at the weekend by Vittorio Grilli, Italian treasury chief and lead eurozone negotiator, is a victory for German-led northern creditor countries who have been pushing for Greek bondholders to accept far more of the burden for a second bail-out. Reuters writes that a paper prepared for Wednesday’s summit proposes that the eurozone combine two current ideas for the EFSF: an insurance model and a special purpose vehicle. Meanwhile, Silvio Berlusconi called a crisis cabinet meeting for Monday night local time to consider new economic reform proposals after the prime minister returned to Italy following his humiliation at the eurozone leaders’ summit in Brussels, writes the FT.
Silvio Berlusconi is expected to end months of speculation and procrastination on Thursday by nominating Lorenzo Bini Smaghi as his choice to replace Mario Draghi as governor of the Bank of Italy, reports the FT. Italy’s prime minister had been caught in a three-way struggle between Nicolas Sarkozy of France, the Bank of Italy and Giulio Tremonti, finance minister, over the nomination, with the long delays costing Italy on debt markets, which saw the issue as another example of paralysis within the Italian government. Government sources, who asked not to be identified, said Mr Berlusconi had chosen Mr Bini Smaghi, currently one of six members of the European Central Bank’s executive board, in order to defuse a diplomatic row with France ahead of the European Union summit this weekend.
Baffled by recent stock market volatility?
Don’t be. Read more
First the caveat. The following is written by the chief economist of a big Italian bank. So you can be forgiven for thinking “he would say that, wouldn’t he.”
But Unicredit’s Erik F Nielsen is surely onto something when asks why Italian funding costs are sitting above 5 per cent while investors demand just above 1.6 per cent to lend to the UK government. Read more
Italy’s squabbling centre-right government has cobbled together a compromise austerity package that relies heavily on a renewed crackdown on tax evasion to reach the goal demanded by the European Central Bank of a balanced budget by 2013, reports the FT. After three weeks of disputes and multiple revisions, Giulio Tremonti, finance minister, reached a political deal with coalition leaders and a text was submitted to the senate budget commission on Thursday evening. But disclosures on Thursday that Italy’s 74-year-old prime minister was once more embroiled in a sex scandal – and allegedly blackmailed by a prosthetics businessman pimping for prostitutes – raised questions over his ability to survive yet another controversy while imposing unpopular austerity measures. Full details of the deal and further details of Berlusconi’s alleged behaviour are available via the Corriere Della Sera.
Italy’s squabbling centre-right government has cobbled together a compromise austerity package that relies heavily on a renewed crackdown on tax evasion to reach the goal demanded by the European Central Bank of a balanced budget by 2013, reports the FT. After three weeks of disputes and multiple revisions, Giulio Tremonti, finance minister, reached a political deal with coalition leaders and a text was submitted to the senate budget commission on Thursday evening. The spectacle of Italy’s ruling politicians led by Silvio Berlusconi quarrelling over where the cuts should fall had already undermined the country’s credibility among foreign investors well aware that the eurozone’s third biggest economy, with €1,900bn ($2,700) of debt, is too big to rescue with a Greek-style bail-out. But disclosures on Thursday that Italy’s 74-year-old prime minister was once more embroiled in a sex scandal – and allegedly blackmailed by a prosthetics businessman pimping for prostitutes – raised questions over his ability to survive yet another controversy while imposing unpopular austerity measures.