Meanwhile In Italy...

Tyler Durden's picture


UPDATE: Reuters reports that 20 senators from Berlusconi's party are preparing to create new party if Berlusconi does not soften stance against PM Letta - EUR and Italian Bonds are ramping.



Via Bloomberg,

Berlusconi faces demands from his lawmakers to back down on confrontation with Letta, Reuters reports citing party official.

We can't help but feel this is well-placed Reuters propaganda as we saw in 2011 - later to be denied but for now it is having the desired effect...


Before this we noted:

With Italian bond spreads 35bps wider in the last few days and the FTSEMIB stock index tumbling, it is clear the uncertainty in Italian politics is raising anxiety levels. The rest of Europe is catching that cold too (especially Greece and Spain). As Deutsche Bank notes below in the brief but complete summary of where we go next, the various scenarios that are possible, and market reactions, the actions represent the acceleration of an end to a very fragile environment.


Via Deutsche Bank,

On Saturday (28 Sept.), Berlusconi called for the resignation of the ministers of his party (PDL). All five ministers resigned from the cabinet, but three of them implicitly criticised the decision of de facto bringing down the government. The move came in after PM Letta (PD) announced late on Friday that he would ask for a confidence vote early this week. Recall that on 25 Sept., the MPs of the PDL had threatened to resign if the Senate Committee on 4 Oct. decides for Berlusconi’s expulsion from the Senate due to his convictions for tax fraud. A decision that will have to be confirmed by the whole Senate around 20 Oct.

The actions represent the acceleration of an end to a very fragile government. A government that has not only failed to push through any significant reform, but has even promoted some counterproductive policies (e.g., cutting property taxes rather than labour taxes).

What happens next? Towards a new government crisis

Uncertainty remains unusually high even by Italian standards. We expect that the Italian government will formally fall after a confidence vote probably on 2 Oct., leaving us with the following tentative scenarios:

Base case: a new coalition is patched together with PD still at the helm with support from some PDL and Five Star Movement (5SM) members. This government would have only limited scope: approve the 2014 budget and a new electoral law ahead of new elections in spring 2014. Recall that the centre-left has a majority in the lower house. So the Senate is the key battleground. 161 votes are needed to obtain a Senate majority. Assuming the PD (108 minus the Senate President), Mario Monti's Scelta Civica (20) and Senators for autonomous regions (10) support a new government, 24 additional votes are needed. Extra support would have to come from dissenters within the 5SM (50) and PDL (91) as well as from ex-5SM senators (4), Sel (7) and senators for life (5). The ensuing government would be once again very fragile.

Alternative scenario: Failure to form a new government coalition, which would trigger early elections in late 2013 or early 2014. On the one hand, President Napolitano repeatedly stated he wants to avoid early elections with the current electoral law.1 Note that current polls suggest that with the current law new elections are likely to result in another stalemate. On the other hand, on Sunday Napolitano did not hint, as he did in the past, to the possibility he could resign to block immediate early elections (a new president would have to be elected).

Likely market reaction

In any event, with the OMT in place, we would not expect a market stress worse than the one seen after the February 2013 elections, unless (i) the PD fails to unite behind a strong candidate and (ii) opinion polls show that a populist or anti-euro party clearly leads in the opinion polls.

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Mon, 09/30/2013 - 08:56 | 4005107 GMadScientist
GMadScientist's picture

Attention whores.

Mon, 09/30/2013 - 09:46 | 4005239 WTFUD
WTFUD's picture

'Attention ( deficit ) Whores'

Mon, 09/30/2013 - 08:57 | 4005109 LawsofPhysics
LawsofPhysics's picture

...the wine still flows.  Meh.

Mon, 09/30/2013 - 09:01 | 4005114 Grande Tetons
Grande Tetons's picture

Great, a stronger Euro should help stimulate the european economy. 

These fuckers do not even know how to fight a currency war. 

Mon, 09/30/2013 - 09:02 | 4005125 Bearwagon
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Scendere il mio prato, cazzo!

Mon, 09/30/2013 - 09:04 | 4005138 J Pancreas
J Pancreas's picture

I remember back in high school what a bunch of tools and douchebags the kids that were running for student council, class officer, etc. were. No different for .gov trolls. They're all ugly, have no problem lying, and were never one of the popular kids back in the day hooking up with girls or having fun on the weekends. Italian or American politico's are unimportant mountain-trolls.

Mon, 09/30/2013 - 09:18 | 4005160 Sudden Debt
Sudden Debt's picture

I QUIT!!!!



Mon, 09/30/2013 - 09:22 | 4005168 Wolf in the Wilds
Wolf in the Wilds's picture

Hmmm, do you really really want to bet against the old Fox of Italy, the master of Machevallian politics?  Do you really think Berlusconi will risk this move without some sort of certainty?   




Now that is worth a think through.

Mon, 09/30/2013 - 09:28 | 4005175 Sudden Debt
Sudden Debt's picture




Mon, 09/30/2013 - 09:42 | 4005226 butchee
butchee's picture

Is the nOMT in place?

Mon, 09/30/2013 - 09:44 | 4005237 The Limerick King
The Limerick King's picture



Greece is a terrible mess

Now Italy's feeling some stress

A nasty affair

But none can compare

To the clown show that is the U.S.

Mon, 09/30/2013 - 09:49 | 4005257 shovelhead
shovelhead's picture

At first, it was Beppe.

Now the whole Italian Govt. is doing...


Mon, 09/30/2013 - 10:16 | 4005332 Bahamas
Bahamas's picture

Italy is for sale and Berlusconi does not sell (privatise) fast enough. He is trying to claw his way back into power, but the Anglo Atlantic Lodges want him out of the game.

Mon, 09/30/2013 - 11:23 | 4005540 10mm
10mm's picture

I am really tired of looking at this antique hair club ginzo.

Mon, 09/30/2013 - 13:34 | 4006182 Freddie
Freddie's picture

Silvio and Beppe Grillo are hated by the EU/euro scum.  They are heroes in my book.


Mon, 09/30/2013 - 15:59 | 4005972 TNTARG
TNTARG's picture

They're all broken.

(And broke).

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