Sunday, July 10, 2011

ECB Insider: European Rescue Fund Not Big Enough to Save Italy

The existing European rescue fund now in place is not large enough to protect Italy as it was never designed to do that, an unnamed European Central Bank source was quoted telling Die Welt newspaper on Sunday.

"The existing rescue fund in Europe is not sufficient to provide a credible defensive wall for Italy," the central bank source was quoted telling the newspaper in an advance text of an article to appear on Monday.
"It was never designed for that," the source added.

No kidding, it isn't even big enough to rescue Greece.

In the coming months Italy plans to go  to the market for 120-130 billion euros of bond issues. What is the market reaction to this?  On Friday, the premium investors demanded to hold Italian debt over German bunds hit a euro lifetime high of 236 basis points.

 Shares in Italy's biggest bank Unicredit sank 7.9 percent and Italy's blue-chip FTSE MIB index fell 3.5 percent.

Expected  to come in a t 120 percent of gross domestic product this year, Italy's gross government debt is the second highest in the EU after Greece.

Will Germany and northern euro members buckle and add more money to the rescue pool or will the ECB money printing commence?


  1. To Bob (or any other helpfuls),

    What would be the safest, easiest way in your opinion to bet on the breakup of the Euro?

  2. Is Italy or Spain going to become a serious problem this year ?
    I always thought they had a year or 2 left.

  3. I clicked on comments to ask the identical question!!

    I wanted to short China, but that turns out to be difficult.

    So..... Any suggestions out there???

    Thanx in advance

  4. Gold! Physical gold (preferably eagles) in your possession. All you can possibly afford. No matter what bad happens, you do not own someone else's liability.

  5. Well, since TPTB in the EU are outlawing short sales of Italian debt, that is one option off the table.

    It seems to me that these moves are becoming even more desperate. CDS for Italian debt are spiking, and since it is a MUCH larger part of the EU than Greece the fallout will be much worse.

    Tomorrow should be very interesting.

  6. @ Capn Mike - some ways to short China will be to short the CRB index or short the Australian dollar or the Australian equity index ASX200.

  7. Surprise, surprise....the IMF is calling for the US to raise its debt ceiling....

    One world government on the way, yay!