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's Monday Madness

Italy has officially entered the hit parade of the Eurozone victims and it has rightfully taken the pole position shadowing immediately any other country.
Greece and Portugal are no longer a problem if next week the market will keep shooting on the Italian treasury bonds and if a clear sign from both Rome and Frankfurt will not be passed to the bond vigilantes.
Few days more like Friday and we are facing potentially a Lehman collapse multiplied 10+ times.
That this situation is getting out of control is demonstrated by today's pre-emptive declarations in view of tomorrow's Black Monday on the european markets.
The first pre-emptive strike came today from the EU summoning an emergency meeting tomorrow on the Italian situation, after scaring everyone with this sudden move they tried to diminish the event saying it was about Greece and Portugal and they will talk marginally and briefly about Italy, after noticing that it was too a pathetic attempt to cover up the real subject of the meeting they went on confirming that it was not about Italy but was going to discuss about the Italian crisis (reading: we are scared and we do not know what to do).


In the meanwhile the usual unnamed European Central Bank source was quoted telling Die Welt newspaper on Sunday that "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.
The newspaper said that the rescue fund might have to be doubled to up to 1.5 trillion euros. But it was not clear if it was the central bank source calling for the increase. Regardless this is sending a message to international investors that the ECB would be unable to shield Italy if push come to shovel. Either this is an insanely naive declaration or the message is forget a bailout of Italy if the situation get dire next week. Furthermore even if it was doubled Spain is facing a bigger spike than Italy on yields and once this escalate it would be impossible to bailout 2 of the biggest economies in Europe which would be followed almost immediately by France.
Right to the point as usual and back to writing right in time for the epilogue Ambrose Evans Pritchard in his article on The Telegraph is clearly outlining the sorrow state of Spain and Italy.

A brief excerpt below:

If the ECB's Jean-Claude Trichet is right in claiming that Europe was on the brink of a 1930s financial cataclysm a year ago - and I think he is - it is hard see how the threat is any less serious right now.
Yields on Italian 10-year bonds hit a post-EMU high of 5.3pc on Friday. This is not just a theoretical price: the Italian treasury has to roll over €69bn (£61bn) in August and September; it must tap the markets for €500bn before the end of 2013. The interest burden on Italy's €1.84 trillion stock of public debt is about to rise very fast.  
Spanish yields punched even higher, through the danger line of 5.7pc. The bond markets of both countries are replicating the pattern seen in Greece, Portugal, and Ireland before each spiraled into insolvency. And the virus is moving up the European map. French banks alone have $472bn (£394bn) of exposure to Italy and $175bn to Spain, according to the Bank for International Settlements. 
Italy's premier Silvio Berlusconi has chosen this moment of acute danger to undermine his own finance minister, Giulio Tremonti, the one figure in his cabinet respected by global bond vigilantes. "He's not a team player, and thinks he's genius and that everybody else is a cretin," said Mr Berlusconi.
Meanwhile, Mr Tremonti is living free in the Rome house of a political ally just arrested on corruption charges. Resignation rumours circulate hourly. You can hear the knifes sharpening.
"The government ceased to exist months ago," wrote Massimo Giannini in La Repubblica.
"What other country would allow itself the suicidal luxury of offering cynical markets such a spectacle of political disintegration and institutional decay at a time when Europe is destabilized by Greece's sovereign debt and haunted by contagion? We have a band of poltroons dancing under the volcano, and the volcano is about to erupt." 
The PMI data for Italy and Spain have dropped below the recession line. The Goldman Sachs global PMI indicator shows that 80pc of the world is tipping into a slowdown, including India and China. Taiwan's bell-weather exports to China sank 12pc in June from the month before.