Italian premier Mario Monti is mulling emergency action to take direct control of Sicily’s regional government before the island spirals into a full-blown financial crisis, fearing contagion to the rest of Italy. We thought it was coming (as we wrote yesterday); we heard the rumors; but now the 'temporary liquidity problem' that faced Sicily has been resolved by... yes, you guessed it - the transfer of EUR400 million from the Italian government. Do not worry though. As one official noted "there's no default risk for Sicily, whose budget was in surplus in 2010 and 2011". Unbelievable.
As Bloomberg notes:
"The developments in Sicily are very serious," said Prof Giuseppe Ragusa from Luiss University in Rome. "It is just the sort of negative shock we don’t want right now. Everything has to go perfectly for Italy to pull through."
"We mustn't let the disaster in Sicily infect Italy"
"We are victims of disinformation, lie, and falsehoods. What are we supposed to do? Cut even further? Detonate a social explosion in Sicily? Turn Sicily into a land of desperation where everything is destroyed," Sicily's governor Lombardi said.
"Sicily is not at risk of default," said Mr Lombardo, blaming the crisis on cuts by Rome itself under its EU-imposed austerity regime. "We face a liquidity crisis linked to the recession in the rest of the country. It is hard for lots of regions, and not just Sicily."