| Italy, can it pull through? |
| 10.11.11 10:29 | |
|
The funds left in the EFSF would not last Italy very long if it were to need a bail-out. A credit line from the IMF would likely be an embarrassment for the Eurozone and could prove equally unpopular with many emerging market governments. The ECB is widely expected to step up its bond buying efforts but the sheer size of Italy’s EUR1.9 trn debt suggests that at some point the ECB may have to start printing money to facilitate a large scale support plan and this is inconsistent with its inflation targeting mandate. Whatever measures are put in place to support Italy in the coming weeks, it is imperative that Italy starts to help itself. For this to happen it needs a (technocrat) government with a strong mandate in support of reform. Italy has a large tax base and a high level of wealth which puts the country in a far stronger position than either Greece or Portugal. If the government had taken a more pro-active position on budgetary reform a year or so ago, than Italy could have avoided the crisis it now finds itself in. Now the measures will have to be more painful to drag Italy and EMU away from the edge of the abyss. Today’s Italian bill auction is not expected to go well. Next week’s BTP auction is also likely to be difficult but the pace at which Italian politicians can show initiative in the next few days could determine the course of Europe’s future for potentially years to come. Without positive news, the EUR remains vulnerable for a move towards EUR/USD1.3300. source: Rabobank |
| < Prev | Next > |
|---|