The Delays Begin: Italy Pushes Back Balanced Budget Target By One Year

Tyler Durden's picture

As reported last week, and as shown brilliantly by Artemis Capital, the end of every reliquification phase by the Fed, such as the imminent end of Operation Twist with nothing firmly set to replace it, is always accompanied by a surge in vol, which in turn leads to market days like the past week, when market summaries are simple: either it is all Risk On, or Risk Off. Expect many more of these until Twist finally ends in just over two months at which point much more liquidity will be needed to achieve the same "flow" results. It just so happens that today is a risk On day, driven by previously noted "catalyst." Yet what is great about such days is that they allow all the bad news to be packed into a tidy little package and disseminated without anyone noticing, or pretending to notice. Such as the just announced headline from Reuters, which on any other day would have crippled the mood, that "Italy will delay by a year its current plan to balance its budget in 2013, according to a draft forecasting document to be approved by the cabinet on Wednesday." And while we have seen this over and over in the past 2 years, first with Greece, then with all the other PIIGS, it merely exposes the fact that exuberant optimism never pans out in a world in which the real average debt/GDP is what Reinhart and Rogoff would simply call "unsustainable." And while this news will matter once Germany realizes that its precious fiscal pact is already been soundly rejected, first by Spain and now Italy, for now it is but a footnote in the otherwise lacking newsflow: after all Spain managed to issue €2 billion in Bills, which contrary to yesterday, provides that all is again well in Europe. Until Thursday at least when Spain has to issue 10 year bonds, which just happen to mature outside of the LTRO. The narrative then may be somewhat different.

From Reuters:

The draft Economic and Financial document, obtained by Reuters, raises the budget deficit forecasts for 2012-2014 and slashes this year's economic growth outlook.


The 2012 deficit target is increased marginally to 1.7 percent of gross domestic product from 1.6 percent, while the 2013 goal is raised to 0.5 percent from 0.1 percent.


The substantially balanced budget (a 0.1 percent deficit) is now targeted in 2014.


The economy is now forecast to contract by 1.2 percent this year, according to the document, compared with a 0.4 percent decline in GDP projected by Mario Monti's government in December.


The draft DEF forecasts that the public debt will rise this year to 123.4 percent of GDP from 120.1 percent in 2011, and fall in 2013 to 121.6 percent.

To summarize the hockey stick in all its glory: 2012 GDP growth cut by 0.8% in 2012, but offset by even more growth in 2013. When incidentally, total debt to GDP is now expected to grow from 120.1% to 121.6%. How this happens? Don't ask us - one needs a Harvard Econ Ph.D. to reach such improbable conclusions.

As for Italy, here is an artist's rendeing of all current and future projections:

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hedgeless_horseman's picture






In goal, number 26 in your program, but number one in your hearts, Mario Draghi!

Dick Darlington's picture

This from FT Alphaville:


Are Italy’s forecast revisions already out of date?

stocktivity's picture

Doesn't matter...the Fed, the ECB, the IMF ...all of them could keep printing for much longer than we think. No way for a small investor to play fair in this rigged casino. It's all Bullshit!

Mr. Lucky's picture

What happen; the currency sniffing dogs at the border didn't work out?

SilverTree's picture

Don't forget, dogs sniff butt-holes for identification and general greetings too.

insanelysane's picture

Nearby town got $1 million stimulas last year and hired 20 teachers.  This year, no stimulas, so there is a $1 million short fall.  Their plan?  Take $1 million from rainy day fund (which is all of it) and hope that the economy improves next year.  Doesn't matter where you are in the world, politicians count on hope when making financial decisions.  Does GAAP have a special symbol to denote Hope on a balance sheet?

Id fight Gandhi's picture

Nothing gets done, made or hired without "stimulus" or some kind of government incentive in this country.

Dick Darlington's picture

Until Thursday at least when Spain has to issue 10 year bonds, which just happen to mature outside of the LTRO. The narrative then may be somewhat different.

The spanish perception management team has reduced the auction size into roughly half of the normal in order to show all is well and that there's huge demand. The MSM will cheer this on thursday and the clueless equity complex will celebrate like it did today. Was funny to watch italian bonds and equities going up today while Bank of Italy gave a first glimpse into the Q1 GDP saying it shrunk 0,7% QoQ and making Q1 the third negative quarter in a row.

MunX's picture

The funny thing is this will show all is well until summer.

pods's picture

They should just put a sign up that says:
"Balanced budget next year" and point to it when people ask when things will be fixed.


Al Huxley's picture

Predicting that Italy, Spain, USA, etc. will fail to meet their deficit reduction targets is like predicting that the sun will rise tomorrow, or that it will get warmer in the summer and colder in the winter.

holdbuysell's picture

"Italy Pushes Back Balanced Budget Target By One Year"



Italy Pushes Back Balanced Budget Target TO NEVER.

If fixed it. That reads much more like reality.

crawl's picture

Definitely risk on today with strong arom a of bear trap too. Decline cannot be allowed, at any cost.

msorense's picture

What do you think the US will do at the end of this year and the manadatory spending cuts kick in?

MunX's picture

Now that sir is the big question.

Ghordius's picture

Now that sir is the big question you were not supposed to pose.

Al Huxley's picture

Change the law, of course.  'Mandatory spending cuts' are roughly the equivalent of 'deficit/debt ceilings.  I'm amazed anybody believes they'll be adhered to (maybe nobody does).

pods's picture

It is always mandatory.

Until it isn't.


Stuck on Zero's picture

Every PIIG at the trough promises to diet later ...

SDRII's picture

The entire western approach is Reflexivity in action. Confidence virtuosity. The groundwork was put in place back in 2002 with the Nobel award to Kahneman (pun not intentional) (Soros funded University)


Herdee's picture

I'm comin' in fast,down the right wing along the boards,in I come,and it's a blistering slapshot that nails that basturd stoned cold directly in the forehead!

unicorn's picture

italy sells its gold to switzerland

id like to know more about that, please...