Monday, June 24, 2013

Here We Go Again: Italy Could Need EU Rescue Within Six Months

 Ambrose Evans-Pritchard reports:
Mediobanca, Italy’s second biggest bank, said its “index of solvency risk” for Italy was already flashing warning signs as the worldwide bond rout continued into a second week, pushing up borrowing costs.
“Time is running out fast,” said Mediobanca’s top analyst, Antonio Guglielmi, in a confidential client note. “The Italian macro situation has not improved over the last quarter, rather the contrary. Some 160 large corporates in Italy are now in special crisis administration.”
The report warned that Italy will “inevitably end up in an EU bail-out request” over the next six months, unless it can count on low borrowing costs and a broader recovery.
Emphasising the gravity of the situation, it compared the crisis with when the country was blown out of the Exchange Rate Mechanism in 1992 despite drastic austerity measures.
Italy’s €2.1 trillion (£1.8 trillion) debt is the world’s third largest after the US and Japan. Any serious stress in its debt markets threatens to reignite the eurozone crisis.
Most of the global financial world is a patch job that could break apart at any point. Italy is as good a point as any from where global panic could result.


  1. Well, not that is changes anything, I think it is 4th largest debt. Germany's absolute debt is higher than Italy's.

  2. "...unless it can count on low borrowing costs and a broader recovery."

    If we accept that 'broader recovery' is highly unlikely to occur within 6 months, then 'low borrowing costs' are a must if they are to avoid a bail-out (and/or bail-in?).

    So are we to see a staggering amount of fresh manipulation to suppress rates or wait for the mother-of-all bailouts to be required?

    As for reigniting the eurozone crisis... when did it ever go out? The fuse is still smoldering.