Italy Expected To Cut Growth Forecasts Further

Tyler Durden's picture

Even though Europe is closed, and the requisite ES ramp appeared on cue just as expected, Reuters has released some news which will put the Risk Off trade solidly back on the books, after it announced that "Italy will shortly cut its growth forecasts for this year and 2012 to bring them more into line with those of independent bodies, but the prospects for public finances have improved due to an increase in value added tax, government sources told Reuters on Monday." It continues: "A government forecasting document to be published in the next few days following the austerity plan approved by parliament last week will cut the 2011 growth forecast to 0.7 percent from 1.1 percent and lower the 2012 forecast to "1 percent or below" from 1.3 percent, the sources said." Someone who will certainly be very unhappy with this news is Moody's which is already delaying cutting Italy (and said last week it will have to do something within the month), but this will make any additional delays impossible, as well as push the rating agency to trim the country's credit rating by more than just one notch.

Another report from Reuters underscores the tough place Moody's finds itself in:

Italy's austerity plan approved by parliament last week will hit the finances of the country's regions and local governments and has negative implications for their credit ratings, Moody's ratings agency said on Monday.


"These measures are credit negative for Italian (regional and local governments) since they add imminent pressure to already stretched budgets and introduce uncertainties on the allocation of powers and responsibilities to local governments," Moody's said. 


The agency is reviewing the sovereign credit rating of the euro zone's third-largest economy after putting it on negative ratings watch three months ago.


Moody's noted the large contribution that regional and local governments will have to make to Italy's effort to balance its budget by 2013, with a reduction of 3 percent of their annual budgets over the next three years.


It said planned revenue-enhancing initiatives, such as giving local and regional administrations more control over their own tax rates and allowing them to retain proceeds from tax evaders they unearth "will only partly compensate for austerity driven transfer cuts".

Needless to say, a teetering Eurozone will not be happy with the additional headline risk. Look for added pressure on the EURUSD as a result once this news start getting processed by the algos.

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GeneMarchbanks's picture

Black Swan event!

Seriously, do European financials expect to survive into October?

Ethics Gradient's picture

It's only a black swan if you're an ostrich.

JW n FL's picture



New item in your series of interest:

Working Paper No. 11/218: Growth Spillover Dynamics from Crisis to Recovery Author/Editor: Poirson, Hélène ; Weber, Sebastian Summary: Can positive growth shocks from the faster-growing countries in Europe spill over to the slower growing countries, providing useful tailwinds to their recovery process? This study investigates the potential relevance of growth spillovers in the context of the crisis and the recovery process. Based on a VAR framework, our analysis suggests that the U.S. and Japan remain the key source of growth spillovers in this recovery, with France also playing an important role for the European crisis countries. Notwithstanding the current export-led cyclical upswing, Germany generates relatively small outward spillovers compared to other systemic countries, but likely plays a key role in transmitting and amplifying external growth shocks to the rest of Europe given its more direct exposure to foreign shocks compared to other European countries. Positive spillovers from Spain were important prior to the 2008 - 09 crisis, however Spain is generating negative spillovers in this recovery due to a depressed domestic demand. Negative spillovers from the European crisis countries appear limited, consistent with their modest size.

Cognitive Dissonance's picture

That's a damn shame.

And about time.

SheepDog-One's picture

E-Trade baby also has a Zerohedge account under the name 'RoboTrader'.

SheepDog-One's picture

Well theyve got about 1 more day to do their ES melt-up routine, enjoy.

msmith's picture

EURUSD continues its bearish trend It has a long way to go still


oogs66's picture

but all is good....

Gandalf6900's picture

why is everyopne picking on little italy, we are poor defensless sheep hoerders that drive a ferrari...

kito's picture

but...but...they are raising taxes!!!!!! more money for berlusconi orgies!!!!!!!!!!

Ignorance is bliss's picture

Italy says VAT increased. Is their a VAT for Gold and Silver purchases? Just saying... The Romans used Gold and Silver successfully as money for thousands of years.

RobotTrader's picture

I mean really, how many freaking burritos can a person eat? Chipotle about to burst to new record highs amidst a total meltdown in Europe.

Ignorance is bliss's picture

Chipolte sells natural food at a reasonable price. Everyone of the Chipolte's I've visted over the last couple of years has been doing really brisk business. The middle class Sheeple are starting to believe their food might be poisoned. At least I do, if I can't make it myself with organic foods, then Chipolte is one of the places I would consider eating as a healthy fast food option. I don't know what their stock price justifies but I can certainly understand why their business does well.

adr's picture

I hope for your sake you are kidding to give Robo a nice boner.

Chipotle says they purchase some items from organic producers and some pork comes from free range sources. That doesn't mean it all comes from there. Nearly all Chipotles are about as organic as your local Burger King. Check out the calorie count as well. Not nearly as healthy as you think. Chipotle is a fraud. The green veggie crowd is the easiest bunch of nutjobs to con in the world.

I love watching veggies order the refried beans. Sometimes I nod and say, you know those aren't vegan you know. They're cooked with pork fat just like all Mexican cooking. Sometimes they snear at me and sometimes they are horrified and actually ask.

As Chipotle continues to hire ignorant minimum wage mexicans who think handwashing is for holidays, they are one Chi Chi's moment from a multi million dollar lawsuit. I stopped eating there after I saw a pan full of undercooked chicken and bugs in the obviously unwashed lettuce. You eat at Chipotle you are gambling with your life. Unless you like samonella.

lolmao500's picture

All that while Berlusconi is banging whores all day.
"In one conversation taped by investigators in early 2009, Mr Berlusconi told him: "Last night I had a queue outside my door, there were 11 of them. I only managed to do eight of them, I couldn't manage any more. You just can't get round to all of them"

Italian premier Silvio Berlusconi boasted in newly leaked taped phone conversations that he is "only prime minister in his spare time," and complained that meetings with the pope and world leaders are interfering with his sex life.

Women 'flown from London for Silvio Berlusconi's sex parties'

The businessman accused of being Mr Berlusconi's pimp spent £70,000 on recruiting escorts, bringing them in from all over Italy as well as the UK, a dossier of evidence drawn up by investigators claims.

Gianpaolo Tarantini, 36, allegedly paid for the women to travel to Mr Berlusconi's homes in Rome, Milan and Sardinia, putting them up in luxury hotels and paying them 1,000 euros a time to have sex with the 74-year-old premier.


Outlaw Of The Wasteland's picture

Things can't get much worse, so this is "bullish" right, cramer?

Dick Darlington's picture

Spain will see it's ratings cut soon. Bad loans are climbing in the bank balance sheets, just hit 16 year high in July according to Bank of Spain.