# Italy - Is it saveable?



## Aussiejeff (12 July 2011)

Well, looks like the Pied Piper is knocking on the Eurodoor again... 

"Contagion" is the buzz-word and Italy is right in the firing line it would seem. So, if Greece folds soon (as is likely) will it take much to topple Italy? 

My own gut feel is "no". However, I also think the Euroboffins will move heaven and earth to keep Italy in the fold once the crunch comes. They are too big to fail....?


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## Aussiejeff (12 July 2011)

http://www.tradingeconomics.com/government-debt-to-gdp-list-by-country

Click option to select Euro area. Note Italy is 2nd worst for Government Debt to GDP ratio in Eurozone (a whopping *119%* in 2010! Only Greece was worse at what appears now to be a terminally ill *142%* of profligacy!). 



PS: The above site offers a myriad of other damning stats for Italy and fellow PIGS if you have a few hours to spare....


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## Aussiejeff (12 July 2011)

Hmm.

Italy's FTSE MIB down a further 3.4% on open, following on from yesterday's rout.


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## tothemax6 (12 July 2011)

I thought iberia was next to blow up?


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## Garpal Gumnut (12 July 2011)

Aussiejeff said:


> Hmm.
> 
> Italy's FTSE MIB down a further 3.4% on open, following on from yesterday's rout.




A contact in Milan tells me that Italy's debt spreads are widening by the day.

It will be a quicker denouement, than Greece, if it happens.

And it will be nasty with huge repercussions on Europe and the US., all of a sudden.

gg


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## RandR (12 July 2011)

Aussiejeff said:


> http://www.tradingeconomics.com/government-debt-to-gdp-list-by-country
> 
> Click option to select Euro area. Note Italy is 2nd worst for Government Debt to GDP ratio in Eurozone (a whopping *119%* in 2010! Only Greece was worse at what appears now to be a terminally ill *142%* of profligacy!).
> 
> ...




I know what you mean. But look at Italy in 2000, the debt to GDP ratio was already 109%. Over the course of the decade there debt has increased by 10% to 119% ...

In other words, their level of debt has increased by 1% per year for the last decade. Hardly the sort of stuff to cause a sudden panic now. Greece is a different kettle of fish, its debt to GDP in the same decade increased by 40+%.

I know there debt to GDP is very high, but the fact is theyve been managing this already for the last decade. Yet the markets suddenly decide that now its a problem ?


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## Aussiejeff (12 July 2011)

RandR said:


> I know what you mean. But look at Italy in 2000, the debt to GDP ratio was already 109%. Over the course of the decade there debt has increased by 10% to 119% ...
> 
> In other words, their level of debt has increased by 1% per year for the last decade. Hardly the sort of stuff to cause a sudden panic now. Greece is a different kettle of fish, its debt to GDP in the same decade increased by 40+%.
> 
> *I know there debt to GDP is very high, but the fact is theyve been managing this already for the last decade. Yet the markets suddenly decide that now its a problem ?*




I think there is a perception that they have "hit the wall" as far as being able to effectively manage that relatively slow growth in debt burden any longer. GG is right to point out the rocketing spreads on their bonds. The cost of managing the existing debt has suddenly gotten out of their control and the ratings agencies will want their pound of flesh this time after being humiliated for not portending the first GFC.

IMO, of course 


Cheers,

aj


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## Starcraftmazter (12 July 2011)

Can anyone comment on this?
http://macrobusiness.com.au/2011/07/blame-the-lenders/

To me, it implies that on a macroeconomic scale, because of the way the EU monetary union works, it is inevitable that deficit EU countries will default as they are unable to function in the present system they are in, regardless of any amount of bailouts they receive or any internal measures they take (unless they somehow become more productive than surplus countries).

Is this true, or is there more to it?


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## Garpal Gumnut (12 July 2011)

Aussiejeff said:


> I think there is a perception that they have "hit the wall" as far as being able to effectively manage that relatively slow growth in debt burden any longer. GG is right to point out the rocketing spreads on their bonds. The cost of managing the existing debt has suddenly gotten out of their control and the ratings agencies will want their pound of flesh this time after being humiliated for not portending the first GFC.
> 
> IMO, of course
> 
> ...




The Economist online has quite a good analysis of Italy atm. and not just the usual Berlusconi crap. The spreads are a particular concern.

gg


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## nioka (13 July 2011)

Italy has the problem that all the hard and honest workers migrated to Australia in the late 40s and early 50s. The marfia left behind aren't really that productive.


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## springhill (13 July 2011)

nioka said:


> Italy has the problem that all the hard and honest workers migrated to Australia in the late 40s and early 50s. The marfia left behind aren't really that productive.




You are not that far off the mark, it's no coincidence that 4 out of the 5 PIIGS are countries that still believe in the midday siesta.
You don't see too many Germans heading home for an extended lunch break.


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## nioka (13 July 2011)

I also forgot to add " and some of their daughters became some of the best looking "shielas" in the 60s and 70s"


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## finnsk (13 July 2011)

springhill said:


> You are not that far off the mark, it's no coincidence that 4 out of the 5 PIIGS are countries that still believe in the midday siesta.



But then they dont finish work until 8 - 9 Pm some times later.


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## Aussiejeff (15 July 2011)

> The Italian Senate has approved an austerity budget worth $68 billion, in an effort to prevent the European debt crisis from engulfing the country.



http://www.abc.net.au/news/2011-07-15/italy-approves-austerity-measures/2795542

Unfortunately, slapping $68 Billion worth of spending cuts on Italy's economy is like pouring petrol on a bonfire - this kneejerk will in all likelihood simply crunch all Italy's desperate euro neighbours, who are manning the leaky lifeboats in their own deep seas of debt, while relying heavily on Italian consumer spending to keep them from sinking even faster. The same goes for all these Euro countries entirely reliant on massive inter-spending by each other to keep the merry-go-round spinning.

In reality, the whole shebang is rapidly deteriorating into a panicked _"Everybody for themselves!!!"_ scenario, whilst a succession of glib, vacuous Europollies try to maintain a farcical, stiff-upper lip "united Euro" front to the world media & gullible economists. 

This is what they don't seem to grasp. ALL Euro members are in the sinking boat together, whether rich or poor. They are all reliant on each other to sustain booming economic growth to survive. Currently the rich Euromeisters think they can re-float the boat with a flood of cheap cash buoyancy. They're out of any better ideas.  

IMO, the euro loveboat IS still going to go down regardless - it's just a matter of time - and no amount of sleight-of-hand with that Ponzi Eurocheque book is going to help....

aj


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