chart courtesy of Bianco Research

 

The initial market enthusiasm for the bailout of Spain’s banks seems to have faded, as reality sets in. What will be done with Portugal, Ireland and Greece is secondary to what happens with Spain and perhaps more importantly Italy, the 4th largest economy on the continent.

Here is Bloomberg:

“The 100 billion-euro ($126 billion) rescue for Spain’s banks moved Italy to the front line of Europe’s debt crisis as an initial rally in the country’s bonds fizzled on concern it may be the next to succumb. Italy’s 10-year bonds reversed early gains today in the first trading after the Spanish bailout and fell for a fourth day, sending the yield up 20 basis points to 5.98 percent . . .

Italy has 2 trillion euros of debt, more as a share of its economy than any developed nation other than Greece and Japan. The Treasury has to sell more than 35 billion euros of bonds and bills per month — more than the annual output of each of the three smallest euro members, Cyprus, Estonia and Malta.”

Italy is a huge economy, and any danger there has enormous repercussions.

 

 

Source:
Italy Moves Into Debt-Crisis Crosshairs After Spain
rew Davis and Nadine Skoczylas
Bloomberg Jun 11, 2012
http://www.bloomberg.com/news/2012-06-10/italy-moves-into-debt-crisis-crosshairs-after-spain-bank-rescue.html

Category: Bailouts, Credit, Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

15 Responses to “Is Italy Next?”

  1. rktbrkr says:

    There are two Is in PIIGS and the process is moving inexorably to the biggest. Meanwhile in the wake of the not a bailout of Spain the other little piggies are squealing about the better deal that Spain got for their non-bailout

  2. Mike in Nola says:

    Yes

  3. NoKidding says:

    “Is Italy Next?”

    Yes.
    But with all the Euro news don’t forget Japans 223 percent ratio.

    A 1 percent increase in their respective rates blows up the PIIGS, Japan, and the US.
    The central bank policies required to hold rates low enough for survival are deflationary.
    Deflation lowers GDP, and tax collection.
    Decreased taxation increases the fiscal deficit, or increased taxation further lowers GDP.
    Unsustainable cycle is the end game for prolonged deficit spending.

    Why not spend less?
    Not a politician alive willing to do it, and not anelectorate on earth willing to bear the socially uneven consequences.

    Why not print up an inflationary, unbacked by debt, fiscal stimulus?
    It would have to be big enough to make a difference in Debt/nominal gdp ratio.
    Sooooo… the real value of the bankers debt-based assets would get slaughtered.
    Bankers can not have that.

    Stalemate.

    But it cannot last this way forever. Default, austerity, or inflation. Pick at least one, and expect all three.

  4. Concerned Neighbour says:

    I continue to be stunned at how sanguine the market is about the current state of affairs. A lot of participants have bought the argument that risk assets are the place to be because the alternatives suck worse; it’s easy to buy such an argument when folks (central banks) have guns (think gatling gun, not a mere 6-shooter) to your head. To me I don’t buy it; risk assets suck at these levels, too.

  5. BennyProfane says:

    “Italy is a huge economy, and any danger there has enormous repercussions.”

    For over two years, we have been hearing this. “If Greece defaults, the Euro is doomed, doomed I tell you.” Well, they defaulted. Where’s the doom? Now Spain. Where’s the earthquake under our feet? Next Italy – that failure will surely have all of Europe walking around pushing shopping carts like the characters in The Road, right?
    I don’t know, this is just such a slow, slow motion train wreck, I suspect that I’ll ever see real change before i die. Re: Japan after twenty years, and, they’re still waking up and living a decent life, relatively speaking.

  6. “…For over two years, we have been hearing this…”

    like deja vu..

    http://www.ritholtz.com/blog/2011/06/spanish-stocks-yields/#comment-568093

    May 27th, 2011 at 6:12 pm
    Boock,

    re: 9) WTH (heck) with Greece at this point? Hopefully we’ll know next week,…

    you’re, still, asking? I thought “We” ‘covered’ this last Year (?)

    paraphrasing the Point, then: “Fade those Things, they’re heading to 2x-Digitville, in a Hurry..”
    ~~

    Now, Jump to the Head of the Line (if you’re allowed to do so, in ‘Print’)..Fade the S (pain), and the I (taly) in PIIGS…

    Not for Nothing, but You’re Welcome~!
    http://www.ritholtz.com/blog/2011/05/succinct-summation-of-weeks-events-5-27-11/#comment-563711

  7. VennData says:

    Well, you can be sure the off-shore hedge funds will start selling CDS on Italien bonds in concert.

  8. NoKidding says:

    Re: BennyProfane ““If Greece defaults, the Euro is doomed, doomed I tell you.” Well, they defaulted. Where’s the doom?

    Benny, how would you feel right now if you were a Greek citizen living in Greece? No they are not Cormac McCarthy characters, but they are staring at a currency crisis, public service failures and capital flight. If you are old, you may be witnessing your long promised retirement disappear, if you are young, you are witnessing career options disappear.

    The Greeks are feeling that doom right now.

    If you are Spanish, Portuguese, Irish, or Italian, you have to expect the same things coming. If you are German, you have to ask what happens when German banks collapse. Their national trade surplus was funded by loaning their citizens personal savings to citizens of the customer nations in a leveraged way. If the banks collapse, they will have given away years of production for nothing. So what? Well the purpose of saving is to turn yesterdays work into tomorrows spend. They are on the brink of losing their em[ployment and retirement just as the Greeks are.

    You can always do the glass-half-full thing. But e.g. just because Western Europe has been stable and happy for 60 years does not mean that there wasn’t some serious pain and suffering there 60 years ago. Nor does it mean it can’t get that way again.

  9. BennyProfane says:

    Re: No Kidding

    The Greeks were rioting in the streets and living with austerity for some time before the actual default. Sure, they’re hurting, as many in Spain, Italy, Ireland, and Portugal are right now. Everybody ran out of money. But, I don’t see the cataclysm that is being predicted. Harsh to say, but, life goes on.

    BTW, this just hit the wires: http://www.nytimes.com/2012/06/12/business/economy/family-net-worth-drops-to-level-of-early-90s-fed-says.html?hp Hey, we’re just sinking into the sand, too. Ever so slowly.

  10. BP y NK,

    see some of..

    PeterR Says:
    June 11th, 2012 at 2:36 pm

    The next tip of the next iceberg?

    Does this Titanic scenario ring a bell?

    http://www.marketwatch.com/story/recession-crushed-middle-class-wealth-fed-survey-2012-06-11

    from nearby thread..
    ~~~

    anyone have any Wagers on whether ‘Someone’, about ~Now, is, kickin’ back, doing their *best “Hannibal Smith” impersonation??

    http://www.youtube.com/results?search_query=Colonel+John+%22Hannibal%22+Smith+I+Love+It+When+A+Plan+Comes+Together&oq=Colonel+John+%22Hannibal%22+Smith+I+Love+It+When+A+Plan+Comes+Together&aq=f&aqi=&aql=&gs_l=youtube.3…90026.91093.0.91917.2.2.0.0.0.0.100.199.1j1.2.0…0.0.D0PrL6jOmNY

  11. wally says:

    Yes, Italy is next.
    The EU leaders are utterly predictable in their handling of this and I imagine people with big money are making even more money by knowing that.

  12. theexpertisin says:

    There is a theory as to how the next war of conquest will be fought, and won.It is speculkative, but interesting.

    The battlefield will be an economic one, as militaryaction will destroy much of what an invading country would deem valuable in conquest. The country with the most to gain, and possessing the most aggressive cyber and economic warfare tactics, is China.

    Could China be a puppet master sending Europe into a terminal downward economic spiral while holding the US in a weak position, thus ultimately dictating terms for the ultimate bailout (and control over vast aspects of European actions)?

    China has already turned large regions of Africa into a vassal state, why not Europe?

  13. Futuredome says:

    No, Spain will be the next bailout. What just occurred wasn’t a bailout………..

    Spain,Italy,Greece,Portugal,Ireland,France,Netherlands,Germany,Belgium ete ete should all leave the EU. The EU should be abolished. It is nothing more than a scam by the capitalists to try and gut their countries. Once they are gutted, the capitalists will buy up the remains and the EU will be essentially a paper tiger.

    In the US, they are trying the opposite. Destroy the Federal Government and then bankrupt the States through deflation. Then they can come in and buy it up turning the world into international slave states. The resurrection of the international gold standard would be the final destruction of America.

    The inability of people to understand the global capitalists have to be stopped is amazing. America is the greatest Orwellian job on earth. They have people attacking their own government while giving the capitalist gypsies a pass.

  14. rktbrkr says:

    The best description I’ve heard is that they haven’t cut deeply enough yet to amputate the Euro rot. So if thats correct then Italy is next, they haven’t cut their losses quickly enough. Hell, they haven’t recognized their lost causes quickly enough.

  15. constantnormal says:

    Hell, yes.

    Italy next, then France, and then they’ll come for the Germans …

    It’s too late to do anything but watch the dominoes fall …