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ECB Issues Ultimatum To Italy, Threatens To Halt Bond Purchases
Three months ago, in exchange for the ECB's expansion of its sterilized monetizations of bonds to include Italian BTPs, allegedly the only backstop that has prevented Italian bonds from experiencing an all out collapse to date, Italy was presented with a list of strict "austerity" demands, among which were spending cuts, higher revenues and labor reform. Since then none of these has occurred... or will occur, simply because Berlusconi has no control over the government, yet neither does anyone else, although everyone in the local government enjoys having a scapegoat for the total chaos. It appears that the ECB has just made it clear that the status quo is about to end, unless Italy does in fact push with something. And unlike other cases, where politicians on both sides of the table are happy to spout rhetoric while knowing well that nothing will change, in this case, courtesy of Italy largely untenable debt profile in which €166 billion in debt and interest are due in 2012, the ECB will have no choice but to play hard ball. Reuters has just confirmed that, reporting that The European Central Bank often discusses the possibility ending the purchase of Italian government bonds if it concludes Italy is not adopting promised reforms, ECB Governing Council Member Yves Mersch said. "If we observe that our interventions are undermined by a lack of efforts by national governments then we have to pose ourselves the problem of the incentive effect," Mersch said according to extracts of an interview with Italian daily La Stampa to be published on Sunday. In other words on Monday the market will have to not only digest the implications of what the implications of the Greek vote of confidence are (last we checked G-Pap is still PM, and likely will be for quite a while), but also what happens now that the ECB has issued an ultimatum to Berlusconi to get his house in order. The problem is that he can't. Not without stepping down, that is. At that point the Italian pseudo stability that everyone has been taking for granted knowing full well it is nothing but an illusion, will fall and expose all the rot underneath. At that point we will truly see just how "hedged" all those Primary Dealers are, who have perfectly offsetting short positions to all their longs.
And here is what an ECB ultimatum sounds like:
Asked if this meant the ECB would stop buying Italy's bonds if it did not adopt reforms it has promised to the European Union, Mersch, who heads Luxembourg's central bank, replied:
"If the ECB board reaches the conclusion that the conditions that led it to take a dec
ision no longer exist, it is free to change that decision at any moment. We discuss this all the time."
Since the ECB resumed its bond buying programme (SMP) around three months ago it has purchased some 100 billion euros of government bonds, a majority of which are thought to be Italian BTPs.
Mersch said the ECB did not want to become a lender of last resort to help the euro zone solve its debt crisis and said it was concerned that its job could be made more difficult by governments that "don't meet their responsibilities."
And the punchline:
"Our job is not to remedy the errors of politicians," he said.
No, it is merely to issue long overdue "or else" statements. Yet since the EFSF is unable to raise even €3 billion EURs to fund the Irish bail out, we are fairly confident that the ECB will be purchasing Italian bonds for a loooong time, because Berlusconi has figured out all too well just who it is that has the Mutual Assured Destruction trump card, and who stands to lose the most if said Destruction is indeed Mutual.
As a reminder, here is what the Italian debt/interest repayment schedule looks like. Good luck.
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by Patrick J. Buchanan
Coming to the United States Soon...(I Hope)
http://lewrockwell.com/buchanan/buchanan194.html
"...the European Commission reports that Italy’s government interest payments as a percentage of gross domestic product are 4.8 per cent, second only to Greece’s 6.7 per cent and considerably higher than all other major European countries and the US (2.9 per cent). Even Portugal’s ratio is lower at 4.2 per cent."
http://www.ft.com/intl/cms/s/0/6e8f662a-9b26-11e0-a254-00144feabdc0.html...
Berlusconi brushes off debt crisishttp://www.ft.com/cms/s/0/872b9294-070a-11e1-8ccb-00144feabdc0.html#axzz1csQhv7xA
hey i am ok. you are ok. we are ok. i am not worried about this stuff. besides i have a party to go to tonight,,
Ecb is full of shit. I hope berlusconi calls their bluff. Ecb is not buying italian bonds to save italy. Who is the ecb kidding....
Germany, your'e on the hook for the bailout of the Eu, plus you have to give us all your gold. LoL
You will get bombs and bullets before you get the gold. Unless of course the entire German parliament is owned and paid for by the banksters and this is just the final bit of house keeping, sweeping up the gold before turning the lights out.
I lived in Italy for three years, in the industrious north, no less, and I can tell you that shrewdness or cleverness in getting around the rules of a mistrusted governing authority is the national sport and greatly admired. One is said to be furbo. Leave your jacket on the back of a chair at 9:30 and split to your other job? Well done. Retire after 18 years in customs with full pension? Nice! Scam the value added tax? Sweet! 30% of the economy is off the books, black (in nero). Italy has a flimsy sense of nationalism, was only unified, and then just barely, in 1860; is really an agglomeration of city states, and a third world country, these the words of an Italo-British chick I met in Bologna, not mine. Italy is ungovernable. Down south in the mezzzogiorno forget it. Everybody goofs off and scams. Work ethic is spotty; some work hard and hustle. Taken one at a time, Italians are talented, often formidable, but collectively they are a friable mass of self interest and short-termism. National character doesn't change. There is such a thing as increasing returns to deferred gatification and discipline, and a certain level of lock-in with regard to attitudes that flow therefrom -- which is why Germany pulls ahead time after time, and why they are so resented, their dourness aside. Cuando vai in feria? When are you going on vacation? Comes the question for months ahead of the season. Non me sene frega should be on the flag: it means I don't give a damn, to put it politely.
At least Greece went through the motions of pretending to resolve the problem, ... before they defaulted.
Looks like Italy isn't even going to bother.
Government...can't live with it, can't live without it. Everybody's got one. But everybody complains about theirs. And yet some of my fondest memories are thanks to government: my first time voting, the crisp feel of a fresh birth certificate, the thrill of of a new bill.
Me and my government....we got a thing going on
Tough talk from ECB. Heard it before. There's always future compliance, too, even if they comply now.
Ultimately, it's going to be about enforcement and EU doesn't have the stomach for it. Later, there will be raging nationalist movements with guns. Von Rompuy will piss his pants when they say, "Come and make us." It will just piss them off more if they try to cut off the lights to Rome and Venice.
Weekend euro trashing at full swing...selling eurusd perhaps? Yeah, that last talkjob did not go well. Double or nothing!
Mormons may be rich but the religion itself has a lot of limiters built into it that will stymie how far it can go. It's core theology isn't just a little tweak on traditional Christianity - Joseph Smith created something that at the core has significant varaince from traditional Biblical Christianity, though Mormons are expert at keeping their core theology under wraps.
It won't achieve numbers close to Catholic or Protestant in my view.
<Sorry don't know how to move a post - this was meant as a reply on page 1>
this is said to be the most famous Blog in Italy.
There seems to be more content in italian language than in english, but they seem to be saying that Italians are afraid that their government will access peoples bank-accounts and take money from them directly, as already happened in the year of 1992 (by then Premier Giuliano Amato).
http://www.beppegrillo.it/en/
If the Italians can just get through 2021, they will be home free. Fingers crossed:)
We are witnessing the birth pangs of the NEURO, the less corrupt version of the current Euro. The Nordic Euro. Greece and Italy are probably the two most corrupt countries in Europe, likely followed by Spain and Protugal. Banksters that bought their bonds were either bought off, or they are corpulent cretins managing money morons.
“Olive Oil Crisis” – G-20 Wants Germany to Contribute Gold to the Crisis Fund – Germany Says “Nein!”
http://confoundedinterest.wordpress.com
Look at the charts of Greek and Italian 5 yr CDS as of today.
What will the craziness in Europe bring this week?
What a joke, they ain't going to stop because it rescues their banks. never happen, italy should tell them to fuck themselves, and if G-pap wasn't such a pussy he would have done the same thing, owe me a hundred buckes you go9t a problem, owe me a million I got a problem. It will of course never happen.
it has about as much of a chance of happening as the greek referendum
If we Italy owe you, German banks / tax payers 100 Billion Euro, we have a problem. But if we Italy owe you, German banks / tax payers 1.9 Trillion Euro, YOU have a problem.