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Rome Is On The Verge Of Detroit-Style Bankruptcy

Tyler Durden's picture


With European peripheral bond yields collapsing every single day to new all time lows (primarily driven by Europe's near-certainty that a US-style QE is imminent as we first showed here in November, despite Mario Draghi's own words from November 2011 that a QE intervention is virtually impossible), increasingly more of Europe is trading just as safe, if not more, as the United States. And in keeping with the analogies, considering a major US metropolitan center, Detroit, recently went bankrupt, it is only fair that Europe should sacrifice one of its own historic cities to the gods of negative cash flows. The city in question, Rome, which as the WSJ reports, is "teetering on the brink of a Detroit-style bankruptcy."

Rome, the eternal city, which survived two millennia of abuse from everyone may be preparing to lay its arms at the hands of unprecedented corruption, capital mismanagement and lies.

On the first day of his premiership, Matteo Renzi had to withdraw a decree, promulgated by his predecessor, that would have helped the city of Rome fill an €816 million ($1.17 billion) budget gap, after filibustering by opposition lawmakers in the Parliament on Wednesday signaled the bill had little likelihood of passing.


Devising a new decree that provides aid to Rome will now cost Mr. Renzi time and political capital he intended to deploy in promoting sweeping electoral and labor overhauls during his first weeks in office.


For Rome's city fathers, though, the setback has more dire consequences. They must now face unpalatable choices—such as cutting public services, raising taxes or delaying payments to suppliers—to gain time as they search for ways to close a yawning budget gap. If it fails, the city could be placed under an administrator tasked with selling off city assets, such as its utilities.


"It's time to stop the accounting tricks and declare Rome's default," said Guido Guidesi, a parliamentarian from the Northern League, which opposed the measure.

Alas, if one stops the accounting tricks, not only Rome, but all of Europe, as well as the US and China would all be swept under a global bankruptcy tsunami. So it is safe to assume that the tricks will continue. Especially when one considers that as Mirko Coratti, head of Rome's city council said on Wednesday, "A default of Italy's capital city would trigger a chain reaction that could sweep across the national economy." Well we can't have that, especially not with everyone in Europe living with their head stuck in the sand of universal denial, assisted by the soothing lies of Mario Draghi and all the other European spin masters.

So what is the catalyst that would push the city into default? Trash.

No really: an appeal for a €485 million transfer from the central government to compensate Rome for the extra costs it incurs in its role as a major tourist destination, the nation's capital and the seat of the Vatican. "Rome is unique compared with other cities" and deserves state support because of huge numbers of visitors who use services but don't contribute much to the economy, Mr. Marino said in a recent interview. But even before the government of Enrico Letta fell this month, the proposed transfer had prompted complaints that the aid was unfair, given the dire straits of other cities.


Rome has long struggled to balance its books. Because of its dearth of industry, the city depends heavily on trash-collection levies and the sale of bus and subway tickets. It struggles much more than other European cities to collect either one. About one in four passengers on Rome's public transit system doesn't buy tickets, costing around €100 million in lost revenue annually, compared with just 2% of passengers on London's public transit network.

Meanwhile, employee absenteeism at Rome's public-transit and trash-collection agencies runs as high as 19%, far above the national average.

But how can Rome's clean up costs be a surprise? Well, they aren't. What is however, is the severity of the recession that crushed the national economy.

Just six years ago, some €12 billion in city debts was transferred to a special fund subsidized and guaranteed by the national government in a move aimed at giving Rome a fresh start. But Italy's economy has shrunk by almost 10% since then, eroding the tax base just as national austerity programs pushed extra costs onto local governments.


Even before the withdrawal of the "Save Rome" decree, Mr. Marino was facing unpalatable choices. He has already raised cremation and cemetery fees and plans to centralize city procurement, which he says will save €300 million a year.


Now, without the transfer from the central government, he may be forced to impose income and property tax surcharge—already among the highest in the country—and to cut salaries to the city's 20,000 employees or trim city services such as child-care centers or job-training programs—also unpopular moves.

What would happen then is unknown, but hardly pleasant:

The political fallout could be severe. The mayor of Taranto, a southeast city that defaulted on €637 million in debt in 2006, has suffered some of the lowest poll ratings in the country after cutting back services.

Oh well, another government overhaul is imminent then, after all it is Italy. Just as long as it is not elected. Because then there woud be a chance that someone who actually sees behind the facade of lies, like Beppe Grillo for example, may just be elected PM, and then all bets are off.

Howeber, that will never be allowed, and instead Rome will almost surely be bailed out. That however would open a whole new can of worms as every other insolvent city demands the same treatment:

A new appeal for a special transfer to Rome could embolden demands that other cities in distress be helped, even though Italy's public finances are already strained. Naples is close to having to declare bankruptcy. Reggio Calabria has been run by a special commissioner for the past three years, but may still default on €694 million in debt, according to Italy's Audit Court.

And if all else fails, there is the nuclear option: "Some politicians say Rome should sell assets such as ACEA, the electric utility that is worth about €1.8 billion and is 51% owned by the city."

True: and Goldman, or some other bank filled to the gills with the Fed's generous excess reserves, would be happy to swoop in and scoop up hard Roman assets providing it with just the right cover for creeping global encroachment. The benefactors? A select few equity shareholders. Because for every million or so peasants who suffer, a few rich men have to get even richer in the New Feudal Normal.

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Thu, 02/27/2014 - 16:21 | 4486046 A Man without Q...
A Man without Qualities's picture


Thu, 02/27/2014 - 16:24 | 4486061 TeamDepends
TeamDepends's picture

Detroit, Agenda 21 in action!

Thu, 02/27/2014 - 16:27 | 4486076 johnQpublic
johnQpublic's picture

never, since the fall of Rome, have we seen the fall of Rome

Thu, 02/27/2014 - 16:40 | 4486119 Skateboarder
Skateboarder's picture

And we've come and gone a long way my friend. Even minituarized the circus into one convenient iPad, so that every man's circus is his own.

Thu, 02/27/2014 - 16:45 | 4486142 0b1knob
0b1knob's picture

"The endless games played in the timeless zone

Remind me, all roads lead to Rome..."



Thu, 02/27/2014 - 16:51 | 4486171 pods
pods's picture

All they gotta do is debase the Denarius, problem solved.  Just take out a little bit of silver and good to go.



Thu, 02/27/2014 - 17:20 | 4486293 Four chan
Four chan's picture

ship kevin orr over there. "the system" is working perfectly, enslave a free people to

debt and capture all assets through boom and bust "the  system" creates.

Thu, 02/27/2014 - 19:04 | 4486740 J S Bach
J S Bach's picture

Don't worry... Kerry will probably just give them a couple billion like he did for the "new" Ukranian government.  Nothing for Detroit though.

Thu, 02/27/2014 - 19:19 | 4486788 strannick
strannick's picture

Some of those ruined buildings look  a couple of thousand years old.

Thu, 02/27/2014 - 18:17 | 4486502 MillionDollarBoner_
MillionDollarBoner_'s picture

The denarius was based on the price of ten donkeys.

Fact ;o)

Thu, 02/27/2014 - 18:24 | 4486538 Urban Redneck
Urban Redneck's picture

When I want to watch a someone's head spin, I have been known to inquire as to just how Marcus Aurelius added those grams of physical silver back into each coin...

Thu, 02/27/2014 - 16:54 | 4486180 ThirdWorldDude
ThirdWorldDude's picture

In our fiat ponzi world all roads lead to bankruptcy.

Fri, 02/28/2014 - 06:15 | 4487990 Perfecthedge
Perfecthedge's picture

Bring back the Gladiators to entertain the masses.  This time feed the Banksters to the Tigers.

Thu, 02/27/2014 - 16:28 | 4486082 flacon
flacon's picture

There is enough GOLD in the vatican to feed Earth, Mars, Jupiter, Venus, Saturn, Neptune, Pluto, Mercury, and all the rest of the planets. 

Thu, 02/27/2014 - 16:34 | 4486101 fonzannoon
fonzannoon's picture

flacon you still long gold and short spy? Today seems different. they were going up together until recently. not a big deal but today it seems like they are working inverse to each other, which seems like a change from recent behavior.

Thu, 02/27/2014 - 17:04 | 4486223 HyBrasilian
HyBrasilian's picture

He gets his trading tips from Dan Brown...

Thu, 02/27/2014 - 17:11 | 4486224 flacon
flacon's picture

I am still long gld and short spy. But I may cut losses if this rally in spy continutes - as assinine as I believe it is. I did buy some slv yesterday since it is more undervalued than gold right now. This is my trading account - I realize that this is paper metals :)


I have May contracts, so I can afford to wait a bit to see. 


Here is the ratio trade:




Thu, 02/27/2014 - 16:46 | 4486150 HamRove
HamRove's picture

Also your anus.

Thu, 02/27/2014 - 16:59 | 4486204 pods
pods's picture

So you are saying gold is preferable to silver?

Quick, hide the Monster Box!


Thu, 02/27/2014 - 17:07 | 4486234 Silveramada
Silveramada's picture

Detroit? that will NEVER happen to Rome...However Italy in general is almost ready for a ECB bail-out for sure, together with Spain, maybe even France joining the trainwreck soon./....



Thu, 02/27/2014 - 17:30 | 4486344 Steaming_Wookie_Doo
Steaming_Wookie_Doo's picture

From the article: "About one in four passengers on Rome's public transit system doesn't buy tickets, costing around €100 million in lost revenue annually, compared with just 2% of passengers on London's public transit network.

Meanwhile, employee absenteeism at Rome's public-transit and trash-collection agencies runs as high as 19%, far above the national average."


So 1 in 4 doesn't pay for the bus and 1 in 5 don't show up for work to drive the bus. I already see an issue...I bet the London transport system is set up so it's not easy to cheat ('cos heaven knows the Brits would cheat too, if they could). Their own tolerance of dishonesty helps create this conundrum. However, I don't hold harmless those who sell CDOs, embezzle or otherwise cheat the municipalities they are meant to serve--and I mean those at the higher level who steal more in a day than most of these twerps steal in a year of solid effort. 

Thu, 02/27/2014 - 16:24 | 4486063 Skateboarder
Skateboarder's picture

Don't forget to pay the binmen.

Thu, 02/27/2014 - 16:25 | 4486066 max2205
max2205's picture

Lazy diegos

Thu, 02/27/2014 - 20:03 | 4486935 Kirk2NCC1701
Kirk2NCC1701's picture

Wrong country. Diego is a Spanish name.

Thu, 02/27/2014 - 17:50 | 4486408 rotagen
rotagen's picture

Tell my again why Rome matters?

Thu, 02/27/2014 - 16:22 | 4486051 john39
john39's picture

congratuations fiat fucks, the world is broke.  mission accomplished.

Thu, 02/27/2014 - 16:52 | 4486176 TBT or not TBT
TBT or not TBT's picture

Fiat bought Chrysler, right?

Thu, 02/27/2014 - 19:49 | 4486888 Kirk2NCC1701
Kirk2NCC1701's picture

That was actually very punny.
You deserved moar Up arrows.

Thu, 02/27/2014 - 16:22 | 4486053 Rising Sun
Rising Sun's picture

Another day, another shit show, another up day in the markets.




Fuck you Yellen.  Fuck you Barry.

Thu, 02/27/2014 - 16:23 | 4486056 LawsofPhysics
LawsofPhysics's picture

Wait what, I thought Rome collapsed a few thousand years ago?

Thu, 02/27/2014 - 16:45 | 4486147 AlaricBalth
AlaricBalth's picture

And this time I had nothing to do with it.

The Lost Gold of Rome: The Hunt for Alaric's Treasure

In AD 410, the Roman world suffered a catastrophe of unprecedented proportions when a foreign army led by the Visigoth king Alaric sacked Rome and carried off the city’s most valuable treasures. Alaric played a significant role in the dismemberment of the western Roman Empire, but he died before he could leave the Italian peninsula. His followers buried him in a secret tomb laden with the plunder of Rome that may have included the sacred Temple treasures of the Jews.

Thu, 02/27/2014 - 16:55 | 4486183 TBT or not TBT
TBT or not TBT's picture

Let's get the arc of the convenant to DC and open it for a look see.

Thu, 02/27/2014 - 17:05 | 4486229 trader1
trader1's picture

let's take a trip back in time, friends...

indiana jones, opening the ark of the covenant scene:



Thu, 02/27/2014 - 16:24 | 4486060 Stoploss
Stoploss's picture

But, but i thought this time was different??

Thu, 02/27/2014 - 16:24 | 4486062 thamnosma
thamnosma's picture

Debt wasn't built in a day

Thu, 02/27/2014 - 16:27 | 4486073 max2205
max2205's picture

Didn't think kicking the can works?   Italys been doing it for fucking 2500 years

Thu, 02/27/2014 - 17:46 | 4486394 Urban Redneck
Urban Redneck's picture

Yeah, but I need to borrow a couple million Euros from an Italian bank next in the next 60 days, so please- contain the contagion, or postpone the inevitable, since actual job creation also depends on it...

Fri, 02/28/2014 - 06:19 | 4487992 Perfecthedge
Perfecthedge's picture

The Italian Job

Thu, 02/27/2014 - 16:25 | 4486067 SgtShaftoe
SgtShaftoe's picture

All roads lead to rome...

Thu, 02/27/2014 - 19:45 | 4486875 Kirk2NCC1701
Kirk2NCC1701's picture

These days, the other saying might apply: "See Rome and die."

Thu, 02/27/2014 - 16:26 | 4486069 DavrosoftheDaleks
DavrosoftheDaleks's picture

Just bring Goldman in to fix the mess, they'll package up the risk and sell it to someone else.

Thu, 02/27/2014 - 16:32 | 4486096 Jonas Parker
Jonas Parker's picture

GS will sell it to the Detroit bondholders who will be grateful for the deal...

Thu, 02/27/2014 - 16:26 | 4486070 fonzannoon
fonzannoon's picture

They just need clint eastwood to declare it's halftime in Italy. That should buy them 2 years.

Thu, 02/27/2014 - 16:26 | 4486072 Hulk
Hulk's picture

WHen in Rome, do as the Detroitians do !!!

Thu, 02/27/2014 - 20:05 | 4486942 Kirk2NCC1701
Kirk2NCC1701's picture

Bring in Robocop 2.0.

Thu, 02/27/2014 - 16:27 | 4486074 praps
praps's picture

"huge numbers of visitors who use services but don't contribute much to the economy"


What about all the money they spend on hotels, restaurants, bars, shops, toursit attractions, transport etc etc.  Who gets all that?

Thu, 02/27/2014 - 16:37 | 4486117 Its_the_economy...
Its_the_economy_stupid's picture

they all bring picnic lunches. and then throw their trash on the ground.

Thu, 02/27/2014 - 16:41 | 4486132 Skateboarder
Skateboarder's picture

Lunchables and Capri Sun? Sounds about right.

Thu, 02/27/2014 - 16:57 | 4486192 TBT or not TBT
TBT or not TBT's picture

La Dolce Vita!

Thu, 02/27/2014 - 16:43 | 4486138 Traderone
Traderone's picture

And it is one expensive rip off city. 

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