CityLife

 

Foresta Verticale

Italy ready to explode amid government ineptitude

For the good of Italy we can only hope that someone is able to put a muzzle to Berlusconi and force him to shut up!
Yesterday in a move that was supposed to calm markets Berlusconi went to the Parliament illustrating his program to restore growth and stability.
In a country where he controls 90% of the media is easy to brainwash the population with his rethoric on how the situation is fine and there are no risks.
Although with mean foreign investors it is a different story and his stupid comments have not helped at all.
If Berlusconi is hell-bent on destroying the country he is certainly doing a great job with his usual stupid jokes and comments such as:
"Markets are lying on the truth and I would ask them to invest in my firms".
"Since you have money then why not invest them in my company[Mediaset]"
"I don't believe the crisis will spread further and I am not scared if the spread will stay like now"
"Markets are like broken clocks"
He also dismissed an urgent call from Trichet to start immediate reforms to boost growth and dispel market fears.
In the meanwhile after a "Technical Fault" which blocked Milan, Paris, Lisbon and Amsterdam stock exchanges, the day ended with Milan Stock Exchange down more than 5%.
ECB had to intervene and publicly purchase Italian bonds to avoid today's auction from failing and start a cascading disaster although the ECB released a note at later stage where it made clear that is not going to purchase more in the future.
Spain had to cancel an auction on the 18th of August and Wall Street is in free fall with more than 500 points down.
Another minor news which could be exploding in the following days and have a major impact on how to solve this mess is the new IMF Chief Lagarde which just as her predecessor has been involved not in a kinky scandal as Strauss-Kahn but in an abuse of power charge. It appears according to French Judges she facilitated a famous French businessman.
The scariest part is that amid all this turmoil the country at the center of the crisis Italy is practically shutting down with no one left in Rome to take urgent decisions and tomorrow could be carnage on the stock markets.
Italian Parliament went on holidays today regardless, although in order to calm the indignation caused by their long holidays and mass exodus to to Holy Land, they simply managed to shorten their holidays of 1 week so instead of coming back to "work" on the 12th of September will reappear on the 6th of September, of course international markets will no go on holidays and will keep pounding the Italian economy while the government is relaxing on the beach.

Italy: a coming Black Swan?

Quite a day for Italy, a brief recap of the recent events:

UniCredit was two hours ago down over 8%, well beyond the 6.5% when it was halted at by the Milan Stock Exchange Authority and it keeps falling.
Banco Popolare was halted and unhalted and is now down 6%.

Spread on Italian Bonds reached historical highs to 245 with 10 years bonds up to 5.36%, a doom and gloom threshold was set only few weeks ago to 5% by most analysts.

Italian Stock Exchange closed down almost 3.5%

On the political side the situation inside the Italian Government is melting down faster than Unicredit stocks.

Tremonti the Finance minister is having an hard time passing an austerity package with an almost open riot inside the government who is unwilling to support cuts given the recent defeat in local elections and the crumbling popularity of Berlusconi. Tremonti has threatened to resign if the austerity package is not passed and Berlusconi signalled before today that he would gladly accept his resignations.

And if it was not enough Mr. Tremonti is now involved in a fraud and bribery investigation where a former aide Marco Milanese has been arrested and it has come out that the Roman residence of Tremonti (rental price 8000 euros per month) was paid by his former aide directly, the situation is evolving fast and Mr. Tremonti was interrogated today by judges in relation to this and other undisclosed issues.

One more among countless investigations and trials that are involving almost every member of the Government.

The only good news was Mr. Berlusconi interview yesterday where he expressed his intention to leave his party and not to run in the next election in 2013 but even that was promptly put in doubt.

The Government has avoided this time to go again with the usual "we fare better than the majority of Europe" and "everything is under control" propaganda to avoid adding insult to a dangerous crisis.

Mr. Berlusconi has assured that an austerity package will be passed before summer to calm down the markets, quite laughable considering his recent fights with Tremonti while pushing for tax breaks and loosened spending budgets.

Tension inside the Italian government is running viral with insults, fights, trials, arrests and corruption spreading and involving almost everyone.

Italian news are reporting arrests of local and national political and business figures every day now, with levels of corruption and bribery reaching new historical highs surpassing even levels seen in the late 80s during Tangentopoli (Bribesville was the chain reaction of arrests that put an end to the so called First Republic and brought Berlusconi on the political stage).
In the meanwhile the recession is biting hard with families' spending power collapsing, prices surging and unemployment and under-employment reaching scary levels especially among young people.
The recent economical turmoil on the bond and stock markets is clearly signalling a dangerous situation in Italy which is getting closer to Spain while in some cases has already overtaken it.
If markets will not receive a strong signal from the Italian government soon we could have chaos even before August.

Italian stock Exchange shut down after Libya fears treathen collapse

Image via Wikipedia

FT reports: "Borsa Italiana, the Italian exchange, failed to open as usual on Tuesday amid concerns in the Italian broking community about possible fallout from turmoil in Libya. The outage, which left brokers unable to process orders, came a day after the main Italian stock market index closed down 3.6 per cent, making it the worst performing European market on Monday. Traders in London said the failure to open meant that the crucial opening auction, which sets initial prices at the Borsa, had also not taken place. Yet there was growing demand from investors to trade certain blue chip Italian stocks." Following up with a European market participant we got the following: "stock exchange suspension has been ordered to handle massive unwind of positions in some of the largest index components. Significant dislocation occurring on swap and option market on the FTSE MIB as well.... " In other words, when faced with a huge deluge of selling, best to implement the biggest known circuit breaker of all and just shut it down. In the meantime, UniCredit CDS trading away from Italy was 3% wider this morning as concerns about that "7%" spook risk holders.

And Bloomberg's take:

Trading on the Italian exchange remained halted because of “technical issues” after the benchmark FTSE MIB Index fell the most in eight months yesterday on concern Libya’s unrest may affect Italian companies.

Borsa Italiana SpA, owned by London Stock Exchange Group Plc, said in a statement on its website that “restoring operations” are underway after stocks failed to open and the futures market was halted at 12:10 p.m. All markets are suspended, the Milan bourse said in a separate statement.

The trading suspension “is something unacceptable,” said Francesco Vercesi, a money manager at Fiduciaria Orefici Sim SpA in Milan. Investors were permitted to cancel orders submitted before the scheduled opening, the exchange said. Futures trading on the FTSE MIB was temporarily halted Jan. 3 because of technical “issues.”

The FTSE MIB yesterday lost 3.6 percent to 22,230.2, the biggest decline since June 29. Impregilo SpA, the country’s largest construction company, plummeted 6.2 percent to 2.31 euros, the biggest loss since April 2009. The company has 1 billion euros ($1.4 billion) of projects in Libya, according to Milan broker Equita Sim SpA. UniCredit SpA, the nation’s biggest bank, sank 5.8 percent to 1.87 euros, the largest loss since May.

UniCredit was down 2.1 percent to 1.83 euros at 12:44 p.m. local time on Chi-X Europe Ltd., Europe’s largest alternative trading system. Eni, Europe’s fourth-biggest oil company, was down 2 percent to 17.09 euros. Impregilo was down 6.3 percent to 2.16 euros.

They are trying to stop the ship before crashing on the cliff, good luck!

Monopolies, Corporations and the Italian Malaise

"American regulators are examining the close links between Apple and Google, reports the New York Times. It's no secret that Apple and Google share two board members: Eric Schmidt, Google's chief executive, and Arthur Levinson (formerly of Genentech), but the rules on whether such ties promote anti-competitive behaviour are now being looked into."

Corporations on the rise!

It is encouraging to notice that someone is still concerned about competition, trusts and monopolies.
Since the crisis started we have been witnessing corporations merging, buying and consolidating as they wish will little or no oversight. All this has been justified in the context of the economical crisis and supporting the faulty logic that if they do not grow gigantic they will not survive this crisis.
There will be a new anti-trust regulation when and if the crisis will end to prevent a handful of companies to control an entire sector of the economy? The answer will be most certainly NO! Since by then they will be too big to be split and too big to be controlled by any authority or government. Phase II of the corporation evolution has started in September 2008 and although at the moment we see them as victims of this crisis It will not take long to see clearly that they are a dangerous concentration of power and wealth.

The Italian Malaise

If USA poses itself the dilemma of competition and monopolies, in Italy there is no discussion on these issues at all. Italy has more problems with unfair competition and monopolies than US.
A peculiar distortion of the Italian market is the possibility for a member of the board or a CEO to serve simultaneously in different companies. Some of them even serving at the same time in competing companies. Any other country would see this as a disaster for the company since the chances for inside trading, competition manipulation and corruption are endless. Not a problem in Italy since most of the members are chosen or imposed politically and on the basis of the leverage they can bring to the company. Ethical considerations are still non-existent in Italian companies. The stock exchange in Milan is one big happy family manipulating balances and defrauding.
Parmalat crack brought to the attention of the world the incredible corruption and manipulations of the Italian financial market but still this is the tip of the iceberg.
The system is practically rotten, overburdened with debt and the only reason it is still surviving is due to the fact the Italy is a paradise for crooks, balance frauds and book cooking are no longer prosecuted and it is a common practice. The Italian financial system is all image with no substance, this economical crisis will bring more and more cracks on the facade of this house of cards.