Another day, another implosion in Italy, this time focusing on core bank UniCredit, which earlier dropped by 6.5% resulting in a stock halt, only to reopen just modestly higher. There was no immediate catalyst, just more of the same: rumors that FinMin Tremonti is resigning, especially following the arrest of Marco Milanese which indicates the fallout is imminent (see below), rumors that Italian banks are failing stress tests, rumors that Italy has the most exposure to Greece, and other generalized fears which today coalesced around the bank that was the most active today on the European version of Sigma X.In other news, 2 Year government spreads are once again surging as GDP-weighted EU sovereign risk is at fresh all time highs (probably to make company to the Dow Jones Transportation index).
UniCredit stock plunging:
Most active Goldman's European dark pool:
2 Year spread moves this week:
And from Reuters on the Milanese affair, explaining why Tremonti is about to go, pushing the Italy domino over:
Italian Prime Minister Silvio Berlusconi declared on Friday he would not run again when his term expires in 2013, as fresh squabbling hit his government and his economy minister was drawn into a corruption investigation.
In an interview with the daily La Repubblica, Berlusconi repeated remarks that he has made on a number of occasions in recent months, saying that he would not run again and nominating Justice Minister Angelino Alfano as his preferred successor.
He also made disparaging comments about Economy Minister Giulio Tremonti, whose position has been weakened by disputes with other ministers and who came under pressure on Friday after the arrest of one of his closest associates.
"If I could, I would give it up now," Berlusconi was quoted as saying by the newspaper, one of his fiercest media critics. "I am not resigning ... but one could want to."
The problems facing Tremonti, widely credited with shielding Italy from the crisis through his rigid insistence on deficit-cutting measures, grew after Naples prosecutors filed a request for the arrest of his former adviser Marco Milanese on corruption charges.
Tremonti, who until Thursday night used to stay in a house belonging to Milanese for part of each week when he was working in Rome, issued a statement saying he had moved out after magistrates raised the graft allegations.
The fresh troubles for the government came as pressure on Italy, one of the world's most heavily-indebted countries, mounted on financial markets already on high alert over the escalating euro debt crisis.
The premium investors demand to buy Italian debt rather than benchmark German bonds widened to its largest since the introduction of the euro more than a decade ago.