Italian President Giorgio Napolitano laments successive governments had failed to prevent a mountainous public debt from getting out of control. Italokleptocrats have hesitated from resolutely and coherently addressing constraints that should have been loosened and broken from the heavy weight of accumulated public debt. http://venitism.blogspot.com
All Italians demand dolce vita, all evade and avoid taxes, all hate governmen, and many respect omerta. Omerta is a heroic attitude of honor and silence against the omnipotent government. It is common in Sicily, Crete, and certain Italian neighborhoods. Omerta implies the categorical prohibition of cooperation with state authorities, even when one has been victim of a crime. It's based on the premise that government is the #1 enemy of the people and cannot be trusted at all.
Italokleptocrats though are not as bad as Graecokleptocrats. The impunity of the 300 Graecokleptocrats of the Grand Brothel on Syntagma Square is the most freakish thing on Earth. Even though Graecokleptocrats looted many billion euros in kickbacks and churning, not a single Graecokleptocrat has ever gone to jail! They are protected by the parliamentary immunity, and nobody can touch them, no matter what. Moreover, they have the nerve to jail dissident bloggers. It's a long way from the 300 Spartans of Leonidas! Allons enfants de la Grece! http://venitism.blogspot.com
Cabinet divisions hamper efforts to finalize the package. Economy Minister Giulio Tremonti appears increasingly at odds with Berlusconi and the rest of the government. Kleptocracy, Kangaroo Justice, marilizardism, Marilizard Libel, Marilizard Spaghetti, and Marilizard Towers are very common in PIGS. PIGS prefer to detach themselves from reality. One can do that for a while, but now the capital markets are suggesting those days are over. Either you face up to reality or you will be punished.
The government might fall in a few months. It might be replaced by a transition government of technocrats. PIGS first need to implement credible savings measures. PIGS already have considerable problems in that respect. PIGS also need a strict revenue policy. Tax evasion needs to be fought more effectively. And some things have also gone wrong with PIGS' industrial policy.
Il Duce Berlusconi denies he has attacked Tremonti's insistence on budget rigour even at the expense of economic growth. Il Duce Berlusconi's reckless chatter catalyzed a market reaction. Berlusconi publicly questions the austerity drive of his finance minister, Giulio Tremonti, the very man who stands most credibly for a solid Italian finance policy.
Neither a real estate nor banking crisis sparked the financial emergency in Italy. Instead, poor budgetary management racked up enormous debts. Just as it did in the mid-'90s, the euro zone's third-largest economy carries a mountain of debt that equals more than 120 percent of its GDP. That's twice as much debt as Brussels will allow. Only in Greece is the situation worse.
Northern Fourthreichians have the strong suspicion that some of their hard work is going down the drain with the hundreds of billions that are currently disappearing into aid packages and bailout funds for PIGS, lived well at the expense of others, and that those who were more careful with their money are now expected to swallow the poison that is making its way northward.
Magistrates have arrested a businessman linked to a 2009 prostitution scandal on suspicion of trying to extort a million euros from the Berlusconi. Berlusconi has survived dozens of scandals over issues ranging from tax fraud to underage prostitution and the impact of the latest affair is unclear.
Trichet asserts the government has to meet last month's pledge of a clear plan to balance the budget by 2013 and pass reforms to boost Italy's stagnant economy. This is absolutely decisive to consolidate and reinforce the quality and the credibility of the Italian strategy and its creditworthiness. New debts must remain under the European average and fall below the Maastricht Treaty's criteria of three percent of GDP by 2012.
To reach this goal the Italian government plans to save some €45 billion over the next two years. There is much to suggest that Rome can overcome this crisis more effectively than other southern European governments. The economy is still quite productive, the savings rate is comparatively high and its bond market is the third-largest in the world.
ECB might reduce its bond purchases to put pressure on Rome to act more quickly to pass a much disputed 45.5 billion euro package of austerity measures now going through parliament. Doubts have risen over whether the planned austerity measures will be implemented. There are also rumors that their main steward, Tremonti, may leave his post.
Risk premiums for Italian government bonds have therefore reached record levels, which could endanger the country's banks, a number of which have invested in domestic bonds. Rome would be forced to prop up some of these institutions - but government coffers are empty. Speculators have started to bet the country will become insolvent.
Foreign Minister Franco Frattini rules out ECB stopping help PIGS in this way. What PIGS are experiencing at the moment is a shock and awe. But it was also overdue. PIGS are not innocent when it comes to their decline. But providing PIGS with extended maturities and lower interest rates is in no way a true solution. PIGS need restructured debt in order to have a little breathing room. http://venitism.blogspot.com
Spreads rose to 331 basis points, the highest since the ECB started buying Italian paper in August, and yields on 10-year Italian bonds ended the week at 5.29 percent. The fundamental problem is that politicians believe that markets react in panic, in other words, irrationally. But that's not true. The capital markets aren't children who can simply be quieted down. Investors look at the figures and can see that PIGS are going bankrupt.
Markets are more rational than politicians. Punishing PIGS is a rational thing to do. There are people who have invested their money there and have now determined that the investment is no longer secure, so they are pulling out. In addition, there are players who have taken notice that the yields are rising and they are betting on that. That's the snowball effect which we are now seeing. It is not based on panic, but rather on totally rational appraisals. http://venitism.blogspot.com
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