Today the dream of many Italians could have become reality with Berlusconi announcing his resignation after the approval by the end of this month of the austerity budget.
Although my feeling and knowledge of Italian politics would suggest a more cautious attitude.
First he has not resigned yet and he will be in power till approval of the austerity budget, which is supposed to take place at latest by the end of November but given the epic ability of Italian politics to complicate things either willingly or unwillingly could very well last longer regardless of all proclamations of urgency.
Secondly knowing the mindset of Berlusconi he has either struck a deal with the Italian President Napolitano for an amnesty in exchange for his quiet exit from power or he is simply trying to buy time to recover from a majority loss.
It was clear today that Italy was on the edge of bankruptcy if no answer was provided to the total horror of the Italian spread and CDS rates. Italy is clearly weeks if not days away from economic collapse and the total inability of the government to deal with this crisis was shouting for some decisive answer to the markets.
It remains to be seen how many days this resignation promise of Berlusconi will buy before markets will realize that nothing has changed in Italy and that the inability of Italian politics to offer a serious and credible alternative to Berlusconi will not stop the economic collapse.
There is still the thought back in my mind that Berlusconi faithful to his reputation of a shameless crook will pull another trick of his, finding a way to turn this impasse to his advantage. Let's hope it will not be a delaying tactic to block the approval of the austerity package because Italy will be under deep scrutiny and any whiff of fraud will resume the spiral death of the Italian economy.
Furthermore the IMF is going to Rome this week to scrutinize the Italian books as previously done in Greece and we have to hope they will not find ugly surprises or black holes of debt courtesy of our fraudulent still to be Prime Minister Berlusconi.
Showing posts with label collapse. Show all posts
Showing posts with label collapse. Show all posts
November 8, 2011
November 1, 2011
Chaos and Anarchy in Athens
The situation is rapidly degenerating in Greece, in just one day after the surprise announcement of Papandreou indicting a a referendum on the EU bailout we have the following news:
One of Papandreou MPs has left the party and therefore is putting the Government vote of confidence on Friday at risk; voices are spreading of another possible defection bringing Papandreou's Party to a very thin majority.
Venizelos the Finance Minister was hospitalized it seems he found out by the media that Papandreou asked for a referendum, it appears the Greek Prime Minister kept his decision a secret from everyone even his Finance Minister.
The Health Minister has opposed the referendum saying it won't take place in contrast with his Prime Minister.
Papandreou has reshuffled the Army command appointing a new general as the new Chief Commander.
All this sound as full total chaos ready to be unleashed on the nation and the change in the army command could indicate anarchy and military mobilization ready to hit Athens' streets.
And to understand what we canexpect from today's High Stake Greek Gamble read the following From Zero Hedge:
The decision by Greek PM Papandreou to call for a referendum on the latest Greek bailout deal shows that Greece is becoming ungovernable. The PASOK leader made this decision because riots in the streets, increasing refusal by civil servants to implement the austerity measures and the likely loss of his majority in parliament made the survival of the government unlikely within weeks or months.
So Papandreou has gone for broke. He hopes that by winning a vote on the bailout plan he can shut up the opposition both in parliament and on the streets. But this high-risk strategy threatens to bring the whole house of Euro cards down.
At best, we face two months of uncertainty before the vote. The Greek parliament must approve the call for a referendum and the President must agree. And then it depends on how the referendum question is worded. If it is ‘do you want to accept the latest bail out plan’ then the answer will be a resounding no. If they word it so it says ‘do you wish to remain in the Euro zone’ then the answer will be a resounding yes.
At worst, Greece may not even make it to mid- January before there is a disorderly default. Parliament could defeat a vote of confidence in the government on Friday and Greece would be plunged into elections, with the opposition likely to win on a programme of ‘renegotiating’ the bailout plan so tortuously agreed with the Euro leaders.
Also the latest tranche of official funding from the EU and the IMF under the old Greek bailout plan could be frozen if the government falls. Under IMF rules, it cannot disburse a tranche if there is no government. The EU would have to step up to the plate and provide all the funding until the election or referendum is over. Without this money, Greece would be bankrupt.
And just imagine if Greece heads into two months of a referendum campaign with riots and demonstrations in the streets. A run on Greek banks — Argentina-style — would become very likely. It’s true that the rich and many corporations have already moved their euros abroad, but the populace at large would soon be running to get their euros under mattresses fast if they thought that Greece was set to default and leave the euro.
The Greek public debt ratio may be heading towards 180% of GDP next year without the bailout plan, but if Greece leaves the Eurozone with a no-vote in the referendum, a New Drachma devalued by 50% or more would double that debt ratio.
The optimistic scenario is that the Greek parliament backs the government and a referendum campaign is conducted on ‘staying in the euro’, which is won. The Eurozone and the IMF continue to finance the Greeks over the next two months before the new bailout package takes over. The 50% haircut for the banks on their holdings of Greek debt goes through with over 90% involvement; the banks receive funds to recapitalise; and the EFSF is enhanced with new firepower to inoculate Portugal, Spain and Italy from the Greek nightmare. And the G20 meeting comes through with new measures of funding to help Europe.
The more you think about, the less likely that sounds. More likely, the uncertainty will undermine the efficacy of enhancing the EFSF through adequate funding from a Special Purpose Vehicle. It will increase contagion for Italy and Spain, increasing the cost of ring-fencing. And a disorderly default would trigger losses for the ECB itself on its holdings of Greek debt.
One of Papandreou MPs has left the party and therefore is putting the Government vote of confidence on Friday at risk; voices are spreading of another possible defection bringing Papandreou's Party to a very thin majority.
Venizelos the Finance Minister was hospitalized it seems he found out by the media that Papandreou asked for a referendum, it appears the Greek Prime Minister kept his decision a secret from everyone even his Finance Minister.
The Health Minister has opposed the referendum saying it won't take place in contrast with his Prime Minister.
Papandreou has reshuffled the Army command appointing a new general as the new Chief Commander.
All this sound as full total chaos ready to be unleashed on the nation and the change in the army command could indicate anarchy and military mobilization ready to hit Athens' streets.
And to understand what we canexpect from today's High Stake Greek Gamble read the following From Zero Hedge:
The decision by Greek PM Papandreou to call for a referendum on the latest Greek bailout deal shows that Greece is becoming ungovernable. The PASOK leader made this decision because riots in the streets, increasing refusal by civil servants to implement the austerity measures and the likely loss of his majority in parliament made the survival of the government unlikely within weeks or months.
So Papandreou has gone for broke. He hopes that by winning a vote on the bailout plan he can shut up the opposition both in parliament and on the streets. But this high-risk strategy threatens to bring the whole house of Euro cards down.
At best, we face two months of uncertainty before the vote. The Greek parliament must approve the call for a referendum and the President must agree. And then it depends on how the referendum question is worded. If it is ‘do you want to accept the latest bail out plan’ then the answer will be a resounding no. If they word it so it says ‘do you wish to remain in the Euro zone’ then the answer will be a resounding yes.
At worst, Greece may not even make it to mid- January before there is a disorderly default. Parliament could defeat a vote of confidence in the government on Friday and Greece would be plunged into elections, with the opposition likely to win on a programme of ‘renegotiating’ the bailout plan so tortuously agreed with the Euro leaders.
Also the latest tranche of official funding from the EU and the IMF under the old Greek bailout plan could be frozen if the government falls. Under IMF rules, it cannot disburse a tranche if there is no government. The EU would have to step up to the plate and provide all the funding until the election or referendum is over. Without this money, Greece would be bankrupt.
And just imagine if Greece heads into two months of a referendum campaign with riots and demonstrations in the streets. A run on Greek banks — Argentina-style — would become very likely. It’s true that the rich and many corporations have already moved their euros abroad, but the populace at large would soon be running to get their euros under mattresses fast if they thought that Greece was set to default and leave the euro.
The Greek public debt ratio may be heading towards 180% of GDP next year without the bailout plan, but if Greece leaves the Eurozone with a no-vote in the referendum, a New Drachma devalued by 50% or more would double that debt ratio.
The optimistic scenario is that the Greek parliament backs the government and a referendum campaign is conducted on ‘staying in the euro’, which is won. The Eurozone and the IMF continue to finance the Greeks over the next two months before the new bailout package takes over. The 50% haircut for the banks on their holdings of Greek debt goes through with over 90% involvement; the banks receive funds to recapitalise; and the EFSF is enhanced with new firepower to inoculate Portugal, Spain and Italy from the Greek nightmare. And the G20 meeting comes through with new measures of funding to help Europe.
The more you think about, the less likely that sounds. More likely, the uncertainty will undermine the efficacy of enhancing the EFSF through adequate funding from a Special Purpose Vehicle. It will increase contagion for Italy and Spain, increasing the cost of ring-fencing. And a disorderly default would trigger losses for the ECB itself on its holdings of Greek debt.
July 20, 2011
Bridgewater see collapse by 2013
New Yorker has released a must read interview with Ray Dalio - head of the world's biggest hedge fund, Bridgewater.
From the full interview:
Dalio believes that some heavily indebted countries, including the United States, will eventually opt for printing money as a way to deal with their debts, which will lead to a collapse in their currency and in their bond markets. “There hasn’t been a case in history where they haven’t eventually printed money and devalued their currency,” he said. Other developed countries, particularly those tied to the euro and thus to the European Central Bank, don’t have the option of printing money and are destined to undergo “classic depressions,” Dalio said. The recent deal to avoid an immediate debt default by Greece didn’t alter his pessimistic view. “People concentrate on the particular thing of the moment, and they forget the larger underlying forces,” he said. “That’s what got us into the debt crisis. It’s just today, today.”
Dalio’s assessment sounded alarmingly plausible. But when one plays the global financial markets a thorough economic analysis is only the first stage of the game. At least as important is getting the timing right. I asked Dalio when all this would start to come together. “I think late 2012 or early 2013 is going to be another very difficult period,” he said.
From the full interview:
Dalio believes that some heavily indebted countries, including the United States, will eventually opt for printing money as a way to deal with their debts, which will lead to a collapse in their currency and in their bond markets. “There hasn’t been a case in history where they haven’t eventually printed money and devalued their currency,” he said. Other developed countries, particularly those tied to the euro and thus to the European Central Bank, don’t have the option of printing money and are destined to undergo “classic depressions,” Dalio said. The recent deal to avoid an immediate debt default by Greece didn’t alter his pessimistic view. “People concentrate on the particular thing of the moment, and they forget the larger underlying forces,” he said. “That’s what got us into the debt crisis. It’s just today, today.”
Dalio’s assessment sounded alarmingly plausible. But when one plays the global financial markets a thorough economic analysis is only the first stage of the game. At least as important is getting the timing right. I asked Dalio when all this would start to come together. “I think late 2012 or early 2013 is going to be another very difficult period,” he said.
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