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.

DSK released after playing ball with the conspiracy

From the New York Times:


Dominique Strauss-Kahn was released from house arrest on Friday as the sexual assault case against him moved one step closer to dismissal after prosecutors told a Manhattan judge that they had serious problems with the case. 
Prosecutors acknowledged that there were significant credibility issues with the hotel housekeeper who accused Mr. Strauss-Kahn of trying to rape her in May. In a brief hearing at State Supreme Court in Manhattan, prosecutors did not oppose his release; the judge then freed Mr. Strauss-Kahn on his own recognizance. 
What surprise me of this entire story is the clear and manifest lack of subtlety in dealing with all the issue, all this story was stinking from the first moment when NYPD arrested the Head of the IMF in a very delicate moment for both the French Presidential Race and the Greek crisis.
You would imagine that professionals would have verified and double-checked the credibility of the accuser before moving charges and arresting the guilty party, if this is true for every case it is even more true when they were dealing with the potential next president of France and Head of the IMF.
This time though they started a very public stunt of arresting DSK before leaving the country, they sent him to to a maximum and infamous security prison and only after he relinquished his post he was given house arrest.
Then suddenly everyone forgot about him until today, 2 days after the election of the new IMF chief Lagarde (the Finance Minister of President Sarkozy) and 2 days after the Greek government has sold the entire country to the international banking system.
The date chosen for his release is rising even more doubts than the original plot to get him out of the IMF.
He could not be in time to run for president and maybe he was released before deadline simply to avoid an association of this plot with Sarkozy. What is clear is that both US and France wanted him out of the IMF (let us not forget he was an advocate of the end of the dollar as reserve currency) and that DSK has played along while being very quiet; his language has been pacate and he did avoid aside from the first days any publicity with the media. He could have started to release interviews and being vocal on why all this happened but he preferred not.
He knew most probably that he was being given a chance to get out of this conspiracy alive and quietly by playing ball with it and avoiding any fight.
It happened effectively as I thought that charges would be dropped and he would be a free man once he would have relinquished his position. I thought it would have taken more time in order to avoid ringing bells of a conspiracy, but this was not the case.
They have preferred to send a public message. The message it was sent today  is clear: we can hit everyone and everywhere regardless of the status and importance, we can manipulate the media if the case and we do not really care if the plot becomes public or not we just do what we want regardless.
Let's remember what Putin (certainly not a fan of Strauss-Kahn) said after his arrest:
"It is hard for me to evaluate the hidden political motives," the Russian prime minister said in comments posted on the official Kremlin Web site. "But I cannot believe that it looks the way it was initially introduced. It doesn't sit right in my head."

Neither in our heads Mr. Putin!

ECB is losing leverage in dealing with Euro crisis

The latest news from Der Spiegel and the Swiss NZZ confirm what I feared. The toxic assets that devastated the PIIGS economies are being transferred to the ECB and in the medium run will start poisoning the entire Euro area economy. The situation is also getting out of control due to the effective lack of leadership at the IMF and this could explain the rush to send an European replacement as soon as possible, the euro crisis is ready to explode and it is doubtful that a Chinese head of the IMF will have the same concern of Strauss-Kahn toward the indebted euro countries.


Spiegel will report in its headline article today that ECB is "suddenly" finding itself lending out money collateralized by now virtually D-rated bonds.
Per Dow Jones: "Skeleton risks amounting to several hundreds of billions of euros are on the balance sheet of the European Central Bank, magazine Der Spiegel writes in a preview of its edition to be published today.
Those risks arise because banks, above all from Greece, Ireland, Portugal and Spain, have provided as collateral asset-backed securities that are unfit for central bank loans as their debt rating is low or non-existent, the magazine says." 

Also from Dow Jones: "German Finance Minister Wolfgang Schaeuble cautioned in an interview published Sunday that there shouldn't be a conflict with the European Central Bank over a possible restructuring of Greek debt. "If in the end it should come to an extension of bonds, of course, we need the approval of the IMF and above all of the ECB.

From NZZ:
If experts from the EU, the International Monetary Fund (IMF) and the European Central Bank (ECB) do not give the go ahead for the next installment of the bailout package totaling 12 billion euros by the end of June give, then Greece will become insolvent on July 18, as the conservative Journal "Kathimerini" reported.

In the coming days Athens will fast track an aggressive privatization program. According to media reports, real estate should be taxed higher than before.

Further cuts in wages and pensions in the public sector and pensions are no longer excluded. In addition, state-run enterprises are privatized and will sell real estate, they said. The new savings program should be approved by parliament in early June.

Prime Minister Giorgos Papandreou noted in an interview with the Sunday edition of the newspaper "Ethnos" denying any form of debt restructuring. This would be no debate. Greece will repay all his debts, he said.

The head of the Euro Group, Jean-Claude Juncker, has proposed the privatization of state property Greece after the German model of trust. I would appreciate it if our Greek friends would start following the example of the German Treuhand privatization agency, a non-governmental, "Juncker said in an interview with the magazine" Der Spiegel ". This institution should be staffed with foreign experts. "The European Union will support the privatization program in the future as closely as we would conduct themselves," Juncker announced.

Strauss-Kahn replace Bin Laden on the stage

The arrest of Strauss-Kahn is a very alarming issue not only for the case in itself but for the ramifications it will have on the global scenario. The issue if guilty or not is going to be debated in court, reactions to this incredible event are much more important at this stage, while some have openly suggested it is a trap others are more cautious.

But what appears is that this event could not have come to a better moment for both France and USA and maybe China too if true that a possible high profile replacement could come from either China, Brasil or India.
Sarkozy got rid of his  opponent to the next presidential elections while for United States this is derailing in the medium term any talks or suggestions of replacing the feeble US Dollar with Special Drawing Rights from the IMF as global reserve currency.
At the same time this is putting extreme pressure on the Euro by effectively removing a key player of the Euro crisis bailout talks.
Strauss-Kahn was supposed to attend a major meeting with Merkel this week in order to find a solution to the now inevitable bankruptcy of Greece and maybe in the coming months of Ireland and Portugal as well.
If there is a conspiracy certainly it has been quite timely in  setting the trap and it could risk precipitating a crisis in the following months, if there is not a conspiracy it is certainly a major blow to recovery and a very strange event indeed. What I would watch rather than his trial in the following months is the media background noise, it seems we are going to forget Bin Laden very soon; a new distraction from more serious crimes has been put on stage.