As Italy Hints Of Subordination, Did Rome Just Request A "Semi" Bailout?

Tyler Durden's picture


That Italy is now at most days away from technical insolvency is not news: after all we reported on just this a week ago, citing not some fringe lunatics but Bloomberg economist David Powell who said that "Italy would probably be forced into receiving a bailout if it were to face another two weeks like the last seven days." Specifically, "The country would violate the IMF’s definition of solvency if its average cost of debt were to surpass 680 basis points. The fund defines debt as sustainable if the  debt-to-GDP ratio starts to decline before the end of the forecast horizon. A rise to that level would push the ratio up to about  131 percent in 2016 and marginally higher the following year, according  to Bloomberg Brief estimates." This was a week ago... so one more week left, and things have not only not gotten better, they have gotten much worse.

Which is why we were not too surprised to read the following news from Reuters: "Italy will push this week at a meeting of euro zone finance ministers for a semi-automatic mechanism involving the European Central Bank or the permanent bailout fund ESM to reduce spreads of euro zone bonds over Germany, Italy's European Affairs Minister Enzo Moavero said on Monday."

Having done this for a while, we can tell Italy what the bond market, having perused the above sentence, just read: "semi-bailout." Because if Italy is implicitly demanding assistance from the ECB, and the Spanish bailout vehicle, the ESM, then things are about to hit the country with the €1.25 trillion in debt. It is all downhill from there. Oh, and here is what the bond market reads when they see ESM: "not so semi-subordination." For Reference: see the aftermath of the Spanish bailout. Because if in Europe the idiotic plan to avoid a bank run is to announce preparations for one, followed by furious back pedaling, it is only logical (and we use the term loosely) that an attempt to avert a bailout will be pursued by requesting a semi version. Instead, that action always and only leads to one thing: waving the sellers right in.

From Reuters:

Speaking about the automatic mechanism proposal, Moavero said: "The ECB may do it, but in a framework which would respect its autonomy. The mechanisms would make automatic something that the ECB has so far done autonomously. The European Stability Mechanism (ESM) may also do that, although it cannot act as a bank."


Asked if the ECB should re-start its Securities Market Programme (SMP) of buying bonds on the market, which was originally justified as needed to ensure that markets reflected its monetary policy decisions, Moavero said:


"We do not ask them, because we respect the autonomy of the ECB, but obviously any move to reduce spreads is welcome."


Moavero also said that he doubted if the euro zone's permanent bailout fund, the ESM, would be operational by early July as planned because of the ratification schedule in euro zone countries.

And count your lucky stars that is the case, because the second a class priming, bondholder subordinating mechanism comes into play, forget about comparisons to Uganda - Italy will be Spain right there and then.

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Mon, 06/18/2012 - 13:46 | 2536781 LULZBank
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Bail the Fuck out Bitchezz!!!

Mon, 06/18/2012 - 13:48 | 2536789 Manthong
Manthong's picture

I love the smell of bazookas in the morning. 

Mon, 06/18/2012 - 13:59 | 2536829 The Alarmist
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Party on, bitchez ... Bunga Bunga!

Mon, 06/18/2012 - 14:05 | 2536852 Nothing To See Here
Nothing To See Here's picture

And who bails out the bailout providers?

Mon, 06/18/2012 - 14:07 | 2536866 SilverTree
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We do.

Mon, 06/18/2012 - 14:17 | 2536891 Sudden Debt
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Eeuuuuhhhh... Excuse me....
The bank just called and they said your 3 trillion dollar cheque bounced...
Is there a problem we should know about?

Mon, 06/18/2012 - 14:22 | 2536909 Manthong
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Hmm..  shouldn’t this though,  fall under the category “penetration, no matter how slight is sufficient to complete the offense”?

Mon, 06/18/2012 - 14:29 | 2536925 SWRichmond
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No, it's not a semi-bailout, it's a "semi-automatic [bailout] mechanism".

JHFC, it's a semi-automatic assault-bailout!  It's far too powerful!  Does it come with a high-capacity reloading device that lets the bailouts resume quickly when the CBs have run out of bailout ammunition?

Mon, 06/18/2012 - 14:34 | 2536943 SilverTree
SilverTree's picture


Mon, 06/18/2012 - 14:37 | 2536954 camaro68ss
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WTF is a Simi bail-out Bawhahahaha,

Is it like being Simi prego?

Im a simi vergin. hahha

Mon, 06/18/2012 - 14:37 | 2536955 Ghordius
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I recall it was fucked when Berlusconi was at the helm. So semi-fucked seems an improvement?

Mon, 06/18/2012 - 15:10 | 2537053 Benjamin Glutton
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How many semi's you ask? European Bailout Infographic: Presenting The Truckloads Of Cash Needed To Rescue The Insolvent PIIGS

Mon, 06/18/2012 - 15:20 | 2537089 phraseshifter
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you mean "semi-coloned"

Mon, 06/18/2012 - 23:10 | 2538358 Doomer
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semi-fucked = getting a semi up the poop shute

Mon, 06/18/2012 - 16:10 | 2537237 DosZap
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Mon, 06/18/2012 - 14:09 | 2536867 Divided States ...
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Better ask while there's still money left in the bank, thats the ECB that is. Time to front-run the bailout gravy train before the other bankrupt countries (Portugal, Spain, Greece, Ireland) get to more of it first.

Mon, 06/18/2012 - 14:16 | 2536888 Sudden Debt
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Let's do the math:

Eurozone = 17 countries...

1. Ireland
2. Portugal
3. Greece
4. Cyprus
5. Spain
6. France (150 billion counts as a bailout)
7. Italy


I wonder when the remaining once will start to discuss if they will still be able to bailout te rest... Maybe at 8 to 9? Or 9 pigs to 8 crickets?

Maybe the ne5 won't be a bankrupt country but a smart country that says "Fuck this shit, I'm out!!!!"

Mon, 06/18/2012 - 14:22 | 2536907 bdc63
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The Euro is dead!  Long live the Euro!

Mon, 06/18/2012 - 14:39 | 2536959 Ghordius
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right. if necessary we'll have an EUR2. those things have sequels, like QE

looooooong way to go, yet, looooooooong way yet

Mon, 06/18/2012 - 15:24 | 2537106 Dead Canary
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The Euro is dead! Long live the Mark, Peso, Lira, Franc....

Mon, 06/18/2012 - 23:05 | 2538344 Doomer
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Peso Paseta

Last I heard, Mexico was not in the EU!

Mon, 06/18/2012 - 14:22 | 2536910 valley chick
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do the euro math....IMHO, ECB can handle up to and including Spain....with Italy the jig is up.

Mon, 06/18/2012 - 14:40 | 2536967 ArgentoFisico
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I thought Belgium already was on the list

Mon, 06/18/2012 - 14:53 | 2536999 Sudden Debt
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Mon, 06/18/2012 - 15:59 | 2537214 LULZBank
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Get a government first.

Mon, 06/18/2012 - 22:26 | 2538226 Non Passaran
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As a Belgian, he's cheating.
But at least he didn't use bold lettering this time. I guess we should be grateful.

Mon, 06/18/2012 - 15:05 | 2537032 Jake88
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There's a tax that covers it. It's called inflation.

Mon, 06/18/2012 - 14:01 | 2536838 camaro68ss
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So the Euro is simi flat lined?

Mon, 06/18/2012 - 14:06 | 2536858 Carl Spackler
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Still stockpiling olive oil.

Three varieties (my inventory liquidation "sale" begins after the supply shortages are firmly in place):

1. Greek  (limited demand - really only by Greeks in the USA)

2. Spanish  (not as common in the Americas but a good quality product, nonetheless)

3. Italian (most widely used in the USA and easiest to sell)


Mon, 06/18/2012 - 14:33 | 2536936 Dull Which
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Go long Parmesan cheese and Balsamic vinegar: both require lot's of aging and storage/prduction facilities (no cows!)  were hammered in the recent earthquakes near Modena

Disposable Medical devices too

Mon, 06/18/2012 - 14:36 | 2536948 Silver Bug
Silver Bug's picture

The bailouts continue, the QE to infinity continues. They are all broke.

Mon, 06/18/2012 - 14:03 | 2536846 battle axe
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Mon, 06/18/2012 - 14:12 | 2536878 Nothing To See Here
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Or is it (Italy + Spain) * Portgual / (Greece * France) = Germany 2013 ? 

Mon, 06/18/2012 - 14:23 | 2536914 bdc63
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Uhmmm ... no way.  Every third grader knows you can't divide by zero ...

Mon, 06/18/2012 - 14:07 | 2536855 Eireann go Brach
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All of you folks on this site do realize that as much as you bash on Facebook, the ZH up and down arrow serves the same function for you to gain as many green arrows as "likes"! I know you all come back to the page to see how many green arrows you acculumate, just like people do on facebook! So perhaps you all suffer from the same narcissistic delusional disease as those folks on facebook, whereby the tally of green arrows or "likes" one gets, is directly proportional to your levels of self confidence and self importance!

Mon, 06/18/2012 - 14:15 | 2536884 LULZBank
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Mark... What has that go to do with a lukewarm semi bailout?

Mon, 06/18/2012 - 14:16 | 2536889 Spastica Rex
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Did you just take a psych class at your local community college?

Mon, 06/18/2012 - 14:21 | 2536902 fuu
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I think most people use the arrows to agree or disagree with a post rather than reply. Keeps the comments section from getting all cluttered up.

Mon, 06/18/2012 - 14:25 | 2536919 Spastica Rex
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Although, on second thought...

Mon, 06/18/2012 - 14:21 | 2536905 pods
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What the hell, I gave you a green.  



Mon, 06/18/2012 - 14:36 | 2536953 slewie the pi-rat
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bashing narcissism will get him nowhere, here!

he may have been semi-cloned;  i think someone is using his avatar with a muslim name or something...   L0L!!!

Mon, 06/18/2012 - 14:45 | 2536980 Ghordius
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semi-cloning is the ultimate compliment

Mon, 06/18/2012 - 15:01 | 2537023 pods
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When I first read it I saw it as a rant.  Then I really thought about it.

Yep, I like it when I make a good argument and see the green arrows.  Or a funny joke.  

No different than facebook (I think as I do not partake in that).

So, he does have a pretty solid point.  And I think that when you hit too close to home you get downvoted.

CD taught me to really look at things differently.  So this place is much more valuable than FB IMHO on that reason alone.
Nevermind the breakneck pace of articles and analysis by Tyler and the contributors.

But I think he (or she) is spot on when it comes to what those arrows represent.


Mon, 06/18/2012 - 15:24 | 2537107 PivotalTrades
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Its just the subject matter thats different. FB case mindless narsasitic drivel,,ZH Case in most cases the important issues of the day that the masses on FB are ignoring.

Mon, 06/18/2012 - 15:32 | 2537122 pods
pods's picture

Oh I agree.  At least here things that are being discussed are things that actually matter outside the power plant if you will. (in Matrix lingo)

My better half has a FB account and I laugh when she shows me posts of people I know.

Seems it is a place to pretend that your life rocks to all of your pretend friends and they are supposed to pretend that they care.


Mon, 06/18/2012 - 15:40 | 2537140 PivotalTrades
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Amazing how immature most of the country is. I can see the kids but even some of them get bored...mine use to be on it up to 1/2 hour or more a day a year or two ago, now once or twice a week  for 10 minutes. Your right about how everybody's life is so rockin. No matter where they go or what thet do it was "great". Grown ups wasting so much time ,,stupid games,, meanwhile "Rome is burning"

Mon, 06/18/2012 - 14:34 | 2536941 mark7
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How much did you lose again in the IPO? 

Mon, 06/18/2012 - 14:56 | 2536995 Ragnar24
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They're actually the equivalent of saying "hear, hear" -- a term that represents agreement with an ARGUMENT -- or receiving two black balls when Poker Club members didn't see value in a candidate's mind.  

Feedback is critical in the battle of ideas, but not so much when it comes to judging the latest pic from a drunken frat party. 

Mon, 06/18/2012 - 22:09 | 2538164 shovelhead
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You are the winner of my one and only junk.


Mon, 06/18/2012 - 22:02 | 2538138 Buck Johnson
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If they are stupid enough to continue to hold there debt (both Spain and Itally) after seeing what happened and continue to happen in Greece, then they deserve what they get.  The dominoes is falling as it was fortold.

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