Posted: Sun Jul 10, 2011 10:09 pm Post subject: Is Italy next? The banking saga continues ...
With Greece hardly beaten down, the banking crisis moves to Italy.
Italy's debt is bigger than France or Germany's, and it's economy is smaller. Not only that, but it is languishing right now. The main thing, however -- which you won't hear in the mainstream media -- is that Italy's exposure to the toxic assets created by the banking system, is at the highest levels. My suspicion is that all of this goes back to the financial crimes committed by Lehmans and others in the USA -- the notorious CDSx
Exclusive: EU calls emergency meeting as crisis stalks Italy
By Luke Baker
BRUSSELS | Sun Jul 10, 2011 2:45pm EDT
(Reuters) - European Council President Herman Van Rompuy has called an emergency meeting of top officials dealing with the euro zone debt crisis for Monday morning, reflecting concern that the crisis could spread to Italy, the region's third largest economy.
European Central Bank President Jean-Claude Trichet will attend the meeting along with Jean-Claude Juncker, chairman of the region's finance ministers, European Commission President Jose Manuel Barroso and Olli Rehn, the economic and monetary affairs commissioner, three official sources told Reuters.
Van Rompuy's spokesman Dirk De Backer said: "It's a coordination, not a crisis meeting." He added that Italy would not be on the agenda and declined to say what would be discussed.
However, two official sources told Reuters that the situation in Italy would be discussed. The talks were organized after a sharp sell-off in Italian assets on Friday, which has increased fears that Italy, with the highest sovereign debt ratio relative to its economy in the euro zone after Greece, could be next to suffer in the crisis. A second international bailout of Greece will also be discussed, the sources said.
The spread of the Italian 10-year government bond yield over benchmark German Bunds hit euro lifetime highs around 2.45 percentage points on Friday, raising the Italian yield to 5.28 percent, close to the 5.5-5.7 percent area which some bankers think could start putting heavy pressure on Italy's finances.
Shares in Italy's biggest bank, Unicredit Spa, fell 7.9 percent on Friday, partly because of worries about the results of stress tests of the health of European banks that will be released on July 15. The leading Italian stock index sank 3.5 percent.
Don't be confused. These bailouts were at least as much about keeping the French and German banks solvent as they are about keeping Greece solvent.
It looks to me as if Berlusconi has been successful at keeping 'austerity' at bay -- until now. He is on the brink of losing his finance minister.
The chart on this page tells a lot. The horizontal axis arrays the countries of the EU by debt, as a proportion of the GNP. The size of the bubble is scaled to show the relative amount of their debt. The vertical axis indicates their exposure to toxic assets.
The market pressure is due partly to Italy's high sovereign debt and sluggish economy, but also to concern that Prime Minister Silvio Berlusconi may be trying to undermine and even push out Finance Minister Giulio Tremonti, who has promoted deep spending cuts to control the budget deficit.
"We can't go on for many more days like Friday," a senior ECB official said. "We're very worried about Italy."
Monday's emergency meeting will precede a previously scheduled gathering of the euro zone's 17 finance ministers to discuss how to secure a contribution of private sector investors to the second bailout of Greece, as well as the results of the stress tests of 91 European banks.
An anonymous European Central Bank source told one German newspaper the following on Sunday….
“The existing rescue fund in Europe is not sufficient to provide a credible defensive wall for Italy”
The source also added that the current bailout fund “was never designed for that“.
Italy has already implemented austerity measures.
This was not supposed to happen.
But it is happening.
This latest crisis was precipitated by a substantial sell-off of Italian financial assets on Friday. An article posted by Bloomberg described the pounding that the two largest Italian banks took….
UniCredit SpA (UCG) and Intesa Sanpaolo SpA (ISP), Italy’s biggest banks, fell to the lowest in more than two years in Milan yesterday as contagion from Europe’s debt crisis threatened to spread to the region’s third-largest economy.
UniCredit plunged 7.9 percent, the biggest decline since March 30, 2009, while Intesa dropped 4.6 percent. Both hit lows not seen since the period when markets were emerging from the crisis spawned by the collapse of Lehman Brothers Holdings Inc.
Unfortunately, this is just the continuation of a trend that has been going on for a while.
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