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THE PRESIDENT OF the European Council has called top officials together for an emergency meeting as fears grew that Italy could slide into economic crisis.
Herman Van Rompuy scheduled the talks for tomorrow morning after interest rates on Italian government bonds reached Euro-era highs of 5.28 per cent on Friday, Reuters reports. The rates reflect a sell-off of Italian assets by financial markets nervous that the country could be next on the growing list of EU nations in serious difficulties.
Van Rompuy’s spokesman insisted that the talks were “a co-ordination, not a crisis meeting”. However, other sources are understood to have confirmed Italy will be on the agenda. According to the Sunday Telegraph, Italy will require €500billion of funding from financial markets by the end of 2013 and it’s feared rising interest rates on its sovereign debt could prove an impossible burden as the country struggles to make repayments.
One senior ECB official told Reuters: “We can’t go on for many more days like Friday. We’re very worried about Italy.”
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This gets worse and worse. Up until now, people thought that if any country went next it would be Spain.
There were rumours flying around on Friday about Italian banks being in difficulties. The share price of the largest bank (Unicredit) is in free fall. Also, there are signs that Berlusconi and co. are less committed to austerity measures than they were
Italy is far too big to be let fail but it’s also far too big to rescue. Anyway, it’s not about little Ireland any more.
Ciarán, A Chara,
Did you ever honestly believe it was ever about ‘Ireland’?
A Shayne, a stór,
That comment of mine was to indicate that Ireland is now the least of the eurozone’s worries.
You seem to be alluding to something else. Please elaborate. Ar aghaidh leat…..
if italy needs a eu/imf bail out we can kiss good bye to the euro with in a year.europe will pump billions into italy rather then let the euro fail.and who is going to pay for it.you and me the tax payer.those clowns in fg tell us we have no money but will find money to give to italy to bail them out.the brits were right not to join the euro and they were being laughed at.whos laughing at europe now.our friends across the water.bring back the punt…..
Some of them will laugh but it’s not good news for the Brits either. If the eurozone goes down the tubes, the UK economy will take a hard hit.
Yes all of the EU will fall and we the peoplo will pay the price as always why no one in brussels wants to hear what the people have say
At what stage are the Euro heads going to get a grip and stop fighting fires AFTER the event and to use that horrible term “kicking the can down the road”. No leadership, no brains, no vision, just a bunch of idiots in a room all with their own agendas.
They never will! We have Jean Claude Trichet obsessing about inflation and upping interest rates like a demented window cleaner who wants to polish those panes even when the house is burning down. He insists that it’s his job to keep a lid on price rises and the money supply when far far more serious problems are pressing.
I wonder to what extent has this latest phase in the crisis been brought about by the ECB’s recent increase in interest rates, Trichet’s signal that there’ll be another one later this year and the generally exclusive focus on inflation? After all, Italy’s growth was anaemic even in the good times. Now, with interest rates on the up, it can surely only weaken it thereby reducing the scope for trimming the budget deficit, debt/GDP ratio etc.
That’s not to say that there aren’t other forces involved. If you read the UK and American media, you’ll find open derision and contempt for European politicians and a general sense that the *men* of the NY and London financial markets are about to crush the Euro *boys*.
World leading economist after economist pointed out that this would happen as soon as the plans for the Euro were announced. Those who backed the Euro, have been proven wrong, those it said that it was a mistake have been proven right, probably more quickly and to a greater degree than they expected. In ten years time Ireland will not be in the Euro, neither will Greece. It is probably 50/50 at this stage if the currency will even survive. The only thing that can save it now is to federalize debt, of all countries, ie every state shares the existing burdens, and borrows as one,rated as one. Who can see that happening. Another alternative is to start printing like hell, with all the problems that brings. So folks it is either complete monetary union and all tax payers sharing all debt, or print and devalue the currency. Turn the Euro in to the Lira. The Germans can’t complain about the cost, they pushed for this lunacy and now we are all faced with the resulting mess.
We who said the euro would not work where alway told that we are only anti europens now we see one country after another falling right across eurozone now who is right
Ciao, welcome to club ‘bailout’
If you think about it, the whole premise of bailouts is based on the fact that a country apparently cannot afford to ‘burn’ its senior bond holders. Fine, but bond holders are speculators. They base the interest rate they want to charge for their loans on their analysis (risk assessment ) of the financial stability of the issuing country. That’s fine. That is how financial markets work. If a bond traders’ gamble goes wrong, he loses. However what is happening at the moment is the senior bond holders are pushing the interest rate on the revolving debt facility higher and higher, basically leveraging the fear of issuing nations that a default will push them into the financial abyss. They are causing the problem, and rather perversely, profiting hugely from it. The ECB needs to step in and borrow the money on a European basis and then distribute that money to nations in difficulty at a comfortable interest rate. The EURO will collapse, faster than people think if members states don’t stop acting exclusively in their own interests, instead of working as a cohesive force to break the strangle hold that the bond markets have on the weaker member states.
I have a suggestion for the EU. As they have made such a bollhx of it all financially & are very unlikely to get all the billions back that they are dishing out . Just get the printing press for the euro notes and print away the money and just give it to whoever needs it. Sound ridiculous ?
It has been done in several countries, namely Britain and America and Japan. They called it Quantative Easing, we would have done the same if we had our own currency still but then we would not be in this mess, nor would so many countries if the Euro had been dismissed as a foolish idea. Many FG and FF politicians would not have gotten lucrative jobs and consultancy roles in thanks, if that had happened though.
When you print money, you drive inflation, given the sheer scale of the debt mountain facing Europe, which always happens in currency unions like the Euro, it would have to be printing on a massive scale. The value of money would drop in real terms as new containers of notes pumped in to the market. On the plus side a mortgage of 300k would seem small, as a Mars bar may cost 30 euro but in a stagnant economy like the world has now, wages would not rise as fast. The cost of food could go up 200% while your wages stand still. Italy printed loads over the years, that is why the Lira price of a Coffee was around 5000.
If the Euro by some weird twist of fate does survive, its value is going to be sorely tested.
But long as we have the wonderful Govt. that we now have, who just like FF encouraged us to Vote Yes to Lisbon, Yes to Jobs, we should be ok, it not like they were lying to us, they wouldn’t, would they.
I said the above to try and show just how ridiculous the finances of the EU have become.
If we printed money, that would lead to hyper inflation – it has been tried in Germany in the 1920′s an failed horribly
Gis. I agree that it is a real last throw of the dice strategy. It is probably the only thing that can save the Euro at this stage. The sheer vol. of debt that the Euro allowed, and facilitated. The problem is that there is no good choices as a positive options, there is only lesser evils. The other option is that Greek and Italian, ours is replaced with a shared European debt, that is the responsibility of all the Euro Zone states. That is the reality of the Euro, if it is to have a chance to get past this crisis then it is going to have to do either one. Both of them are going to infuriate the continent and both are not guaranteed to work.
I remember seeing a documentary a number of years ago about an organisation called the IMF looking to be a one world order governing the whole world and slowly but surely it’s starting to happen right before our eyes.
Time to pull the plug on euro. The trouble started when it was launched. People got greedy overnight ! Prices went up up and up. It all started then. Now it’s time for it to end. Bring back the punt!
At the rate that this crisis is developing It would not surprise me if the Euro does not even last another year or two.
These problems were all avoidable. In Ireland’s case, all we needed was for Fianna Fáil and the financial regulator not to have had their heads up their asses between 2002 and 2007. That administration had all the tools needed to cool the housing market and didn’t use them.
Similarly, other countries allowed their deficits/debt to grow and chose not to reform and now when the perfect storm has struck, they’re in crisis.
The Germans bit the bullet and did the needful on their economy. There were years of pain but Germany’s doing fine now.
Game over. Greece is going to default. God knows what that will mean for everyone else. Tomorrow will be INTERESTING!
http://www.ft.com/intl/cms/s/0/5ffeabf0-ab09-11e0-b4d8-00144feabdc0.html#axzz1Rjtcy95r
If the Zero Hedge people are to be believed, the Italians are tonight feeling very apprehensive about tomorrow and are contemplating some defensive measures in case things start going down the tubes.
zero Hedge does have some real head bangers commentating on its posts but its track record on predicting events is very impressive.
Though as they say, it is just pointing out the obvious. Italy with stagnant growth, 1.4 trillion in debt and the EU raising interest rates is not a recipe for success.
Short selling ban confirmed.
Those Italians are no fun (joke!).
The euro currency is the reason why we are in this mess. The EU has morphed into some Frankenstein- esque monster that is too big to be workable or democratic. If the eurozone countries still had control of monetary policy such as exchange and interest rates and could take fiscal actions that are in the best interests of it’s own people and not the wider eurozone, these problems wouldn’t be exacerbated as they are. We should exit the euro, reintroduce the punt and go out on our own while still being a member of the EU. The country is reaping the costs of voting in Lisbon now. The EU only wants to protect the euro. They are not concerned with the Ireland’s Greeces and Portugal of this world, so long as the euro is safe then they’ll do whatever it takes. It’s obvious the euro doesn’t work as a currency, time to retrench and revert to the way things were.
Well, in fairness Stephen, while I do agree with most of your points, the problems we’re seeing now go back way before the Lisbon Treaty.
Like dominoes…
Some thoughts: Is there actually a legal mechanism through which we can exit the euro? How long would it take – months, a year, two years? What would be the consequences for our international debt. Why are all mainstream politicians so opposed to this? Are they utterly blinkered by the desire to have their heads patted by Trichet, Barroso and co. or do they actually know what the result of a euro pullout would be?
Like many others here, I’m leaning towards the “pull out of the euro” view…but I’d like to know a little more about the consequences. The EU as it’s currently structured cannot work, it is far too cumbersome and slow-moving to deal with crises of this nature. Back to the drawing board! Why do we need a federalised superstate anyway? Who does it benefit?
Agree, if this government had any clue, they would gather the best minds in the country and work a way out. Time to think about ourselves forget the euro. Enda and co need to start thinking of plan B
There is no mechanism for an exit but the no’s will define the reality not some EU law. Indeed they have broken their own laws in many ways by having bailouts etc, the law will not apply. Leaving the Euro will be very painful, its collapse would be catastrophic. Either one will happen, there is no good choices in a crisis this big. The contradictions and flaws of the Euro that brought the continent to this juncture militate against the crisis being resolved. Countries like Greece and ourselves will implement savage austerity for years, sell off state assets cheap, and in years to come as the severe austerity is seen to fail, the country will have nothing left to loose and everything to gain by leaving the Euro. That said, I think that the markets are going to start smelling blood on the currency in the next year.
Search on google ” how to break up the eurozone”, its an article on the economist website i think! It wouldnt be fun or in any way pretty but at least you would be able to learn some lessons from when Argentina left the dollar but then again politicians never seem to learn lessons from these things happening in the past,history repeats itself and if our bunch of dopes in government were left to try and deal with us leaving the Euro it would be a complete disaster!
I have a suggestion for the EU. As they have made such a bollix of it all financially & are very unlikely to get all the billions back that they are dishing out , just get the printing press for the euro notes and print away and GIVE the money to whoever needs it. Sound ridiculous ?
No. The consequences of such an action are supposedly extremely inflationary, and detrimental to the wider economy. However, if you consider that the economy is basically bankrupt, you probably have an idea there. !!!! They have to do something, quantitative easing, that’s what they call it. ……..I call it ……… shite
Fascinating range of analysis,
Thanks.
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