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Italian Economic Deterioration Accelerates: Q2 GDP Forecast To Drop More Than 1%
Overnight we got some good news on Italian industrial production. Well, get ready to scrap them as according to Italian Trade Union Confindustria, and validating the collapse as predicted by PMI indicators, Italy's Q2 GDP is now expected to shrink more than 1% in Q2: the worst print since 2009, cementing the country's "double dip", and that real-time industrial output in April, now that LTRO has fizzled, is expected to fall 0.6%. None of this should come as a surprise to anyone: after all the only way the periphery can rise is if it crashes hard enough to force the ECB to intervene again. Finally, the country that is next in line after Spain to nationalize its banks, need some pretext after all. Complete economic collapse will surely make stockholders, of other countries' banks at least, happy, as their Italian counterparty risk will soon be footed by the Italian taxpayers themselves.
This is what Italian GDP has been recently. A -1.0%+ print will not make anyone happy.
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Wow....like totally unexpected.
yeah, like you top posting.
Heh heh.....next time we'll all wait for you. How much time do you think you might need?
WHY PRODUCE NOW WHEN YOU CAN PRODUCE IT TOMORROW!
The sun will continue to shine on Italy, but on ever fewer Italian-Italians.
All that staying in the parents house into your 40's and avoiding making bambini (while also subsidizing Arab-Italian bambini on borrowed moeny) eventually kills your whole civilisation.
Won't surprise me!!
Nothing matters anyways... all of Europe could collapse and the Fed would simply PRINT more money... guess who pays for it? YOU DO!!!
HYPERINFLATION likes of which the world has never seen is about to come... one major disaster (think M9.9 earthquake striking LA) and it kicks inflation into high gear... THEY know it and are preparing for the unrest to follow!!
GAME OVER!!!
By the time you figure out what happened, you won't have time to buy supplies or guns!!
Fair point, windows are closing.
I think the concept of event triggered economic outcomes is interesting. The bankers can construct a semblance of stability. They can go to great lengths to keep a fragile system steady. But it becomes so fragile that it cannot survive any abnormal event. Eventually a reset is triggered by reality peeking its head in the room. It is all about knowing the math is at work in the background. But not knowing when the equation will finish.
There is another type of event underlying the supposed trigger, the breaking point on endebtment.
Hemingway nailed it: "How did you go broke? Two ways. Gradually, then suddenly."
The 90% sovereign debt to GDP ratio is a good rule for a second tier country like Italy whose trade economy is pretty big in relation to its domestic economy, particularly given it has no means, inside the EU and Euro, to devalue.
Deflation time. Oh wait, Germany wants inflation, but doesn't want to write any more checks.
This should be fun to watch.
Cannot Italy copy the US and reduce its inflation by a couple of points? Presto, 1% decline becomes 1% growth. And the interest they will pay on their debt will fall sharply.
They need a few ivy-league universities there.
Itailian banks are pretty small. My guess would be they would simply fail. There is a huge Italian insurance company I believe. God help them if that's AIG 2.0.
They were small, now not anymore as they have been absorbed (correction: the State ordered other banks to absorbe them) in the past years creating what today are Unicredit and Intesa which are not so small.
These two plus MPS has more than 50% of market share.
Yep, the banking concentration in most of the big european economies is higher than in supposed TBTF-land, America.
The weakness of these extremely, comically bloated banks, and their ties to political power in their european nation states, is driving much of the tragi-comedy of can kicking we've been watching. Merkozy was about saving the bloated French and German super-banques and uber-banks from immediate implosion, in hopes something will happen to turn the economies around in the meantime. Some exogenous miracle, or catastrophe...
I realize that the world is going to heck in a hand basket. The markets are falling apart , the Fema camps are prepped and ready for occupation, homeland security is loading up on ammo, and preparing to shut down the internet.....but can we talk about something really important? ......Them damn gays want to get married! What the hell are we going to do to stop that?
The good news just keeps rolling in!
Italian equities AND bonds celebrating the accelerating collapse!
A Fed/BIS psy-op.
-0,6% in April is FAR too optimistic...
Expect it to be much worse.
May 10 (New York Times) -- LONDON - UniCredit on Thursday reported strong profit for the first quarter, with net income rising 12 percent, to 914 million euros ($1.2 billion). Investors welcomed the gains, boosting shares of the Italian bank by7.8 percent in late afternoon trading.
But not everything is as healthy as it seems. Almost half of the bank's income in the first three months of the year, or 477 million euros, came from UniCredit's move to buy back roughly 3 billion euros of its own debt, at up to 50 percent of the bonds' face value.
Take out those gains, and UniCredit's net profit actually fell 45 percent, to 444 million euros.
Like many European banks, UniCredit is rejiggering its debt holdings to shore up its balance sheet and meet new regulatory requirements.
The tactic, known as liability management, allows firms to boost their capital reserves by purchasing debt at large discounts from investors. Accounting rules allow firms to book the difference between the original face value of the securities and the current discount price as a profit.
Such moves have helped to bolster the bank's core Tier 1 ratio, the measure of a firm's ability to withstand financial shocks. At the end of March, the ratio stood at 10.3 percent, compared with just over 9 percent a year ago.
"UniCredit's very successful capital increase has given us a rock?solid balance sheet which allows us to confidently face the current environment," the bank's chief executive, Federico Ghizzoni, said in a statement. "Thanks to this and to other capital strengthening measures such as the subordinated bonds buyback in February, we are ahead of schedule of our 2012 Basel III target of 9 percent."
Totally cracked on the comment abt "rock solid balance sheet".
BTFD Monti!
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