Yields on 10-year bonds rose 10 basis points to 4.86pc after a poor auction of short-term debt in Rome. The Italian treasury had to pay 1.7pc to sell €8.5bn (£7.2bn) of six-month bills in a thin post-Christmas market, up from 1.48pc a month ago. The spike in rates came as money supply data released by the European Central Bank showed that real M1 deposits have collapsed at a rate of 2.8pc over the last six months in the EMU bloc of Italy, Spain, Greece, Ireland and Portugal, even though they are rising in northern Europe. "This is comparable with the decline in early 2008 just ahead of the plunge into recession," said Simon Ward from Henderson Global Investors. "The eurozone periphery is locked into a 'double dip' that will undermine fiscal consolidation." Italy's M1 contraction began later than elsewhere in southern Europe but is now accelerating. M1 typically gives advance warning of economic shifts by six to nine months. Mr Ward said signs of recovery in the ECB's broader M3 money data is less reassuring than it looks since the gauge was temporarily boosted by flight to liquid assets on EMU debt worries. The poor auction in Rome may be a warning sign that EU leaders offered too little to restore confidence at their Brussels summit two weeks ago. German Chancellor Angela Merkel vetoed the creation of eurobonds or any serious move towards fiscal union, and shot down calls for an increase in the eurozone's €440bn emergency loan fund. The ECB has so far refused to step in to the breach with overwhelming action. Willem Buiter, Citigroup's chief economist, said the response had been "woefully inadequate", raising the risk of fresh bank failures and a wave of sovereign defaults next year. He said the EU authorities may need a mix of measures worth up to €2 trillion to stop the rot. Italy avoided the sort of property bubble seen in Spain or Ireland and has kept a tight rein on public spending under finance minister Giulio Tremonti. However, the rise in yields looks ominously like the pattern seen in Greece, Ireland, Portugal and Spain when they first began to lose easy access to the capital markets. Neil Mellor, currency strategist at the Bank of New York Mellon, said big institutional investors have been pulling funds out of Italy and rotating into German debt on a large scale. "Our flow data shows that the trend has been just as concerted out of Italian debt as it has been out of Irish or Greek debt. Italy should be able to weather 2011 in good shape but the government's debt dynamics are very poor," he said. Italy is too big to be rescued by a diminishing group of creditor states in the EMU core, should it ever need help. Public debt will creep up to 120pc of GDP next year – or over €1.9 trillion – a level widely seen as the outer limit of debt sustainability. The country's trump card is a high savings rate and low private debt. Total debt is 245pc of GDP, below the eurozone average, and much lower than in Spain, Britain, the US or Japan. This may be the relevant indicator for an economy as a whole. However, low private debt may equally reflect deep pessimism in a country where growth has been glacial for a decade, productivity has fallen since 1995, and global export share is in steep decline. Weekly Advice & Free Reports On The Top Shares With MoneyWeek™ Magazine 1 ridiculously huge coupon a day. Get 50-90% Off London's best! Here's how to profit from Euro's upcoming collapse. Free report.Italy's debt costs approach red zone
Italy's borrowing costs have jumped to the highest level since the
financial crisis over two years ago, raising concerns that Europe's
biggest debtor may slip from the eurozone's stable core into
the high-risk group on the periphery.
Share Tips For 2011
London Coupons
You Ready For Euro's Fall
Saturday, 1 January 2011
S
ugursrt
Today 12:28 PM
Mr.Ambrose Evans-Pritchard.
What about Turkish Economy
KlingonOffTheStarboardBow
Today 06:49 PM
It is a delight ......
ReportRecommend
helenscott
12/31/2010 01:58 AM
Recommended by
3 people
.
"In this global debt crisis we have heard several new notions: Too Big to Fail (AIG) and Too Big to Bail (Spain) and now I would like to add one more - Too Big to Mention. And to that category I would like to assign Unicredit as its founder member.
Unicredit is an institution that never gets mentioned because it is SO big relative to its parent nation that their fates are one. Whatever happens to Unicredit happens to Italy. Thus whatever problems Unicredit may or may not have, no one mentions them because everyone knows Unicredit has the 100% backing of the Italian State and Treasury. You mess with Unicredit, you mess with Italy."
David Malone who had worked as a documentary maker for the BBC for 8 years, wrote the above on his Golem XIV blog three weeks ago. Here is the link to it:
http://golemxiv-credo.blogspot...
Malone also wrote a piece titled 'Madoff, UniCredit and Ireland's regulatory silence' -
http://golemxiv-credo.blogspot...
Village magazine in Ireland ran this cover story just two weeks ago about UniCredit Ireland's adventures (courtesy of an obliging Irish regulator):
http://www.villagemagazine.ie/.../
The wistleblower, who has in the meantime revealed that he was UniCredit's Risk Manager in Ireland, has been revealing more of the story on his blog:
http://whistleblowerirl.blogsp.../
Fears that Beijing's measures to choke off inflation may knock away the central prop of global recovery. 30 Dec 2010 Italy's borrowing costs have jumped to the highest level since the financial crisis two years ago, raising concerns that Europe's biggest debtor may slip from the eurozone's stable core. 29 Dec 2010 The cost of default insurance on eurozone bonds has surged to an all-time high on reports that Greece is preparing the way for a sovereign debt restructuring after 2013, with tacit support from the EU authorities. 24 Dec 2010 Willem Buiter, the Citigroup chief economist and former UK rate setter, warns of a fresh wave of bank failures and a string of sovereign defaults in Europe unless EU leaders come up with a credible response to the crisis. 22 Dec 2010 Citigroup has warned of a fresh wave of bank failures and sovereign defaults in Europe unless EU leaders come up with a credible response to the crisis. 21 Dec 2010 Pimco, the world's largest bond fund, has called on Greece, Ireland and Portugal to step outside the eurozone temporarily and restructure their debts unless the currency bloc agrees to a radical change of course. 20 Dec 2010 If Germany and its hard-money allies genuinely wish to save the euro – which is open to doubt – they should stop posturing, face up to the grim imperative of a Transferunion, and desist immediately from imposing their ruinous and reactionary policies of debt deflation on southern Europe and Ireland. 19 Dec 2010 The ECB is to double its capital base to cope with 'credit risk' stemming from the eurozone debt crisis, paving the way for direct action to shore up the Spanish debt markets if necessary. 17 Dec 2010 Germany has refused to give any ground on Europe's rescue machinery despite the escalating political and economic crisis across much of the eurozone periphery. 16 Dec 2010 Europe's debt woes have moved closer to the core of monetary union after Standard & Poor's threatened to downgrade Belgium over the failure of Flemings and Walloons to form a government. 15 Dec 2010 The EU’s Franco-German "Directoire" and the European Central Bank have between them ruled out all plausible solutions to the eurozone’s debt crisis. 12 Dec 2010 Wikileak cables from the US embassy in Zimbabwe allege that President Robert Mugabe's family and the central bank governor are involved in the illegal smuggling of diamonds from the Marange fields. 10 Dec 2010 Agreement in Washington on a fresh fiscal package has set off dramatic rise in yields of US Treasuries and bonds across the world, threatening to short-circuit any benefits of stimulus. 08 Dec 2010 Iceland has finally emerged from deep recession after allowing its currency to plunge and washing its hands of private bank debt, prompting an intense the debate over whether Ireland might suffer less damage if adopted the same strategy. 08 Dec 2010 Others may gripe about barriers in China but Anglo-Dutch group AkzoNobel is minting euros supplying the greatest housing and infrastructure boom the world has ever seen. 06 Dec 2010 The Royal Bank of Scotland has advised clients to take out protection against the risk of a sovereign default by China as one of its top trade trades for 2011. This is a new twist. 05 Dec 2010 Ben Bernanke, chairman of the Federal Reserve, was expected to open the way for a third blast of bond purchases in a 60 Minutes interview, but any such move is likely to face resistance from Fed hawks and criticism in Congress. 05 Dec 2010 The European Central Bank has rebuffed calls for mass purchases of southern European bonds, despite growing pressure. 02 Dec 2010 As Europe's debt crisis spreads ever wider, the EU authorities are coming under intense pressure to move beyond piecemeal rescues and resort to radical action on a nuclear scale. 01 Dec 2010 The EU-IMF rescue for Ireland has failed to restore to confidence in the eurozone debt markets, leading instead to a dramatic surge in bond yields across half the currency bloc. 29 Nov 2010 Desperate moments call for desperate measures. In June 1940, the British War Cabinet led by Winston Churchill offered a total national merger to a shattered France. 29 Nov 2010 The escalating debt crisis on the eurozone periphery is starting to contaminate the creditworthiness of Germany and the core states of monetary union. 26 Nov 2010 German plans to push for bondholder haircuts in Europe as soon as next year have triggered a surge in default risk on European bank debt and set off further flight from Spanish, Portuguese and Irish bonds. 25 Nov 2010 Borrowing costs for Portugal and Spain have surged to danger levels on fears that Europe's leaders are losing political control of the Irish crisis and have yet to agree on a coherent plan to tackle the eurozone's deeper debt woes. 23 Nov 2010 The Portuguese seemed baffled - and pained - that investors should link their country in any way with Greece or Ireland. I am afraid they must come to terms very soon with some unpleasant facts. 22 Nov 2010Ambrose Evans-Pritchard
Ambrose Evans-Pritchard has covered world politics and economics for a quarter century, based in Europe, the US, and Latin America. He joined the Telegraph in 1991, serving as Washington correspondent and later Europe correspondent in Brussels. He is now International Business Editor in London.
LATEST FROM AMBROSE EVANS-PRITCHARD
China slows as tightening bites
Italy's debt costs approach red zone
Record spike in EMU default risk
Citigroup fears wave of eurozone defaults
Citigroup warns of fresh wave of bank failures
'Untenable policies will lead to euro break-up'
Self-righteous Germany must accept a euro-debt union or leave EMU
ECB doubles capital base to stem Spanish crisis
Germany defiant as Europe suffers
Eurozone debt crisis spreads to Belgium
The eurozone is in bad need of an undertaker
Zimbabwe's 'Blood Diamonds' exposed by Wikileaks
Global bond rout deepens on US fiscal worries
Iceland offers risky temptation for Ireland as recession ends
AkzoNobel strikes rich in China, led by Dulux dog
China's credit bubble on borrowed time as inflation bites
Bernanke’s QE3 faces resistance
ECB bows to German veto on bond purchases
EMU requires 'nuclear response'
Contagion strikes Italy as Ireland bail-out fails to calm markets
Germany faces awful choice as Spain wobbles
EU rescue costs start to threaten Germany itself
German haircut demands fuel crisis
Spain and Portugal under fire as bond spreads hit record
Portugal next as EMU's Máquina Infernal keeps ticking
Subscribe to:
Posts (Atom)
Posts
