Italy defies it's Economy Minister...
Discussion
stongle said:
Could be interesting, especially when the bond holders get bailed in and Italian OAPs pension savings get vaporized. Significant contagion into Germany / France banking sector..
This could be the inflexion point, where the post Financial Crisis punishment of the banks blows up in the face of the Govts whom inflicted it. You cook up a system that requires private sector support of public sector debt balloon (with a tame central bank treating all members debt pari-passu), and you've effectively correlated everyone to elected d*ckheads. Genius plan. Genius.
Won't happen of course, expect some can kicking and the ECB doing more retard.
Why we had to have a BREXIT vote before the EU managed to blow up their economy is the bigger travesty here.
The Italian public will be forced to take on any debts owed to foreign banks from their own banking system (a la Ireland and Greece). It'll be framed as a bailout but the bailout will be mainly for the good of French and German banks that have loaned money and face it being defaulted on, the Italian taxpayers will ultimately take the hit and all the citizens of the country will take the economic pain. Look at Greece for an example of that.This could be the inflexion point, where the post Financial Crisis punishment of the banks blows up in the face of the Govts whom inflicted it. You cook up a system that requires private sector support of public sector debt balloon (with a tame central bank treating all members debt pari-passu), and you've effectively correlated everyone to elected d*ckheads. Genius plan. Genius.
Won't happen of course, expect some can kicking and the ECB doing more retard.
Why we had to have a BREXIT vote before the EU managed to blow up their economy is the bigger travesty here.
On the wider issue of the Euro, it has been a disaster for the economies of 'southern' European countries which have traditionally used currency devaluation as an economic tool. For Germany however, it has been a massive boon as it has meant that the rest of Europe can afford their exports and kept their currency at a lower level than it would otherwise be (helping exports generally). The general public in aforementioned countries have been brainwashed into thinking it's great for their savings however... The Greeks public wanted to keep the Euro even though it has been a large part of the problem that befell their country.
What an utter fustercluck the European Single Currency and federalism is ... wonder how long they can keep papering over the cracks.
stongle said:
Could be interesting, especially when the bond holders get bailed in and Italian OAPs pension savings get vaporized. Significant contagion into Germany / France banking sector..
This could be the inflexion point, where the post Financial Crisis punishment of the banks blows up in the face of the Govts whom inflicted it. You cook up a system that requires private sector support of public sector debt balloon (with a tame central bank treating all members debt pari-passu), and you've effectively correlated everyone to elected d*ckheads. Genius plan. Genius.
Won't happen of course, expect some can kicking and the ECB doing more retard.
Who knows. There is a lot at play, much of which depends on Italy - they really are in the driving seat and know it.This could be the inflexion point, where the post Financial Crisis punishment of the banks blows up in the face of the Govts whom inflicted it. You cook up a system that requires private sector support of public sector debt balloon (with a tame central bank treating all members debt pari-passu), and you've effectively correlated everyone to elected d*ckheads. Genius plan. Genius.
Won't happen of course, expect some can kicking and the ECB doing more retard.
stongle said:
Why we had to have a BREXIT vote before the EU managed to blow up their economy is the bigger travesty here.
You assume that any ensuing catastrophe will not impact all EU members, or that bail-ins, or additional/restructured contributions might not be requested (demanded) in order to plug the gaps. This was, for quite a few leave voters, one of the considerations.Lucas Ayde said:
stongle said:
Could be interesting, especially when the bond holders get bailed in and Italian OAPs pension savings get vaporized. Significant contagion into Germany / France banking sector..
This could be the inflexion point, where the post Financial Crisis punishment of the banks blows up in the face of the Govts whom inflicted it. You cook up a system that requires private sector support of public sector debt balloon (with a tame central bank treating all members debt pari-passu), and you've effectively correlated everyone to elected d*ckheads. Genius plan. Genius.
Won't happen of course, expect some can kicking and the ECB doing more retard.
Why we had to have a BREXIT vote before the EU managed to blow up their economy is the bigger travesty here.
The Italian public will be forced to take on any debts owed to foreign banks from their own banking system (a la Ireland and Greece). It'll be framed as a bailout but the bailout will be mainly for the good of French and German banks that have loaned money and face it being defaulted on, the Italian taxpayers will ultimately take the hit and all the citizens of the country will take the economic pain. Look at Greece for an example of that.This could be the inflexion point, where the post Financial Crisis punishment of the banks blows up in the face of the Govts whom inflicted it. You cook up a system that requires private sector support of public sector debt balloon (with a tame central bank treating all members debt pari-passu), and you've effectively correlated everyone to elected d*ckheads. Genius plan. Genius.
Won't happen of course, expect some can kicking and the ECB doing more retard.
Why we had to have a BREXIT vote before the EU managed to blow up their economy is the bigger travesty here.
On the wider issue of the Euro, it has been a disaster for the economies of 'southern' European countries which have traditionally used currency devaluation as an economic tool. For Germany however, it has been a massive boon as it has meant that the rest of Europe can afford their exports and kept their currency at a lower level than it would otherwise be (helping exports generally). The general public in aforementioned countries have been brainwashed into thinking it's great for their savings however... The Greeks public wanted to keep the Euro even though it has been a large part of the problem that befell their country.
What an utter fustercluck the European Single Currency and federalism is ... wonder how long they can keep papering over the cracks.
Gecko1978 said:
you say Italian citizens will pay for any defaults on debts owed to French an German banks...maybe or maybe this will be crack that can not be papered over and German an French bond holders may take a hair cut
Nah, it'll be framed as a bailout of Italy's own banking system, without which their economy will implode (because the ECB won't extend funds to their banking system otherwise, or says it won't .....).The reality is that the aim is to prevent defaults on inter-bank loans from other EU regions. Typically the loans come from German banks because of a surplus of German capital (due to their economic success). 'Bailouts' are nothing of the sort - they are loan consolidation with banking system debts ultimately being consolidated onto the national debt.
Just look at the way the Greek government ultimately folded to pressure despite being elected on a mandate to resist EU austerity measures and even having a referendum to confirm it. Then days later, turning around and caving in.
The issue here however is really the Euro - it has killed the Italian economy.
Digga said:
ou assume that any ensuing catastrophe will not impact all EU members, or that bail-ins, or additional/restructured contributions might not be requested (demanded) in order to plug the gaps. This was, for quite a few leave voters, one of the considerations.
We were not in the Eurozone, so couldve been sat on the sidelines wetting ourselves. Too late now, jumped too soon. I mean one out for the EC / EU members is to relax fiscal constraints DUE to BREXIT shock. Just kick the can a little longer.If the balloon goes up, they are bailing in the local populace, they own a lot of the banking debt. I'm not entirely sure the G20 thought Minimum Standard for Eligible Liabilities through fully, quelle surprise.
Agreed, we are not in the Euro, but any fallout - to Italian or French economies - will reduce their contribution to the EU coffers and someone else will have to pick up the slack, especially if further expenditure is incurred at the same time.
I would agree regarding the can kicking; highly likely the ECB will have to resume QE, whatever the outcome.
I would agree regarding the can kicking; highly likely the ECB will have to resume QE, whatever the outcome.
3rd biggest economy objecting to the German / France pact like Greece did but then kowtow'd down to the EU block.
They are a bit bigger than Greece though and it will therefore be a bigger matter.
This is like having a hangover from Brexit and and taking a pint of sherry as the hair of the dog.
fblm said:
For once I'm not following your logic...
Bit too much brevity on a complex subject. My bad.If you look at the EUR zone risk in idiosyncratic terms, we were the hedge worth paying for. The downside risk for a peripheral banking crisis is total for the EU. Target2 is like mainlining crack for financial contagion.
Eurozone banks are so over leveraged it should be funny, but it’s no joke. Their balance sheet is 3 times the total 28 member GDP. They have gamed every single piece of post crisis regulation possible. If a peripheral sh@ts it’s pants, contagion is inevitable. They are allowed, no required to hold govt debt as Capital base to build leverage on (because they made it cash equivalent). They would need non Eurozone banking support to keep people fed. If held to BOE prudential standards, some Italian banks capital base wouldn’t have survived the aftermath of the BrEXiT vote. LCH called 14bn intraday margin alone.
Fighting a contagion event of that size, would make 15 Sept look like a chimps tea party (or rather the aftermath when it looked like Stanley’s and Goldies were about to implode). It would be Greece across the entire EUR zone. The major EU banks are both retail and IB with limited seperation because EU rules roll them up under a single holding co.
The ask would be so large, you could write whatever cheque you wanted.
It won’t happen though, they will almost certainly can kick if events don’t run away from them.
stongle said:
Bit too much brevity on a complex subject. My bad.
If you look at the EUR zone risk in idiosyncratic terms, we were the hedge worth paying for. The downside risk for a peripheral banking crisis is total for the EU. Target2 is like mainlining crack for financial contagion.
Eurozone banks are so over leveraged it should be funny, but it’s no joke. Their balance sheet is 3 times the total 28 member GDP. They have gamed every single piece of post crisis regulation possible. If a peripheral sh@ts it’s pants, contagion is inevitable. They are allowed, no required to hold govt debt as Capital base to build leverage on (because they made it cash equivalent). They would need non Eurozone banking support to keep people fed. If held to BOE prudential standards, some Italian banks capital base wouldn’t have survived the aftermath of the BrEXiT vote. LCH called 14bn intraday margin alone.
Fighting a contagion event of that size, would make 15 Sept look like a chimps tea party (or rather the aftermath when it looked like Stanley’s and Goldies were about to implode). It would be Greece across the entire EUR zone. The major EU banks are both retail and IB with limited seperation because EU rules roll them up under a single holding co.
The ask would be so large, you could write whatever cheque you wanted.
It won’t happen though, they will almost certainly can kick if events don’t run away from them.
Interesting post, thanks.If you look at the EUR zone risk in idiosyncratic terms, we were the hedge worth paying for. The downside risk for a peripheral banking crisis is total for the EU. Target2 is like mainlining crack for financial contagion.
Eurozone banks are so over leveraged it should be funny, but it’s no joke. Their balance sheet is 3 times the total 28 member GDP. They have gamed every single piece of post crisis regulation possible. If a peripheral sh@ts it’s pants, contagion is inevitable. They are allowed, no required to hold govt debt as Capital base to build leverage on (because they made it cash equivalent). They would need non Eurozone banking support to keep people fed. If held to BOE prudential standards, some Italian banks capital base wouldn’t have survived the aftermath of the BrEXiT vote. LCH called 14bn intraday margin alone.
Fighting a contagion event of that size, would make 15 Sept look like a chimps tea party (or rather the aftermath when it looked like Stanley’s and Goldies were about to implode). It would be Greece across the entire EUR zone. The major EU banks are both retail and IB with limited seperation because EU rules roll them up under a single holding co.
The ask would be so large, you could write whatever cheque you wanted.
It won’t happen though, they will almost certainly can kick if events don’t run away from them.
gooner1 said:
stongle said:
Bit too much brevity on a complex subject. My bad.
If you look at the EUR zone risk in idiosyncratic terms, we were the hedge worth paying for. The downside risk for a peripheral banking crisis is total for the EU. Target2 is like mainlining crack for financial contagion.
Eurozone banks are so over leveraged it should be funny, but it’s no joke. Their balance sheet is 3 times the total 28 member GDP. They have gamed every single piece of post crisis regulation possible. If a peripheral sh@ts it’s pants, contagion is inevitable. They are allowed, no required to hold govt debt as Capital base to build leverage on (because they made it cash equivalent). They would need non Eurozone banking support to keep people fed. If held to BOE prudential standards, some Italian banks capital base wouldn’t have survived the aftermath of the BrEXiT vote. LCH called 14bn intraday margin alone.
Fighting a contagion event of that size, would make 15 Sept look like a chimps tea party (or rather the aftermath when it looked like Stanley’s and Goldies were about to implode). It would be Greece across the entire EUR zone. The major EU banks are both retail and IB with limited seperation because EU rules roll them up under a single holding co.
The ask would be so large, you could write whatever cheque you wanted.
It won’t happen though, they will almost certainly can kick if events don’t run away from them.
Interesting post, thanks.If you look at the EUR zone risk in idiosyncratic terms, we were the hedge worth paying for. The downside risk for a peripheral banking crisis is total for the EU. Target2 is like mainlining crack for financial contagion.
Eurozone banks are so over leveraged it should be funny, but it’s no joke. Their balance sheet is 3 times the total 28 member GDP. They have gamed every single piece of post crisis regulation possible. If a peripheral sh@ts it’s pants, contagion is inevitable. They are allowed, no required to hold govt debt as Capital base to build leverage on (because they made it cash equivalent). They would need non Eurozone banking support to keep people fed. If held to BOE prudential standards, some Italian banks capital base wouldn’t have survived the aftermath of the BrEXiT vote. LCH called 14bn intraday margin alone.
Fighting a contagion event of that size, would make 15 Sept look like a chimps tea party (or rather the aftermath when it looked like Stanley’s and Goldies were about to implode). It would be Greece across the entire EUR zone. The major EU banks are both retail and IB with limited seperation because EU rules roll them up under a single holding co.
The ask would be so large, you could write whatever cheque you wanted.
It won’t happen though, they will almost certainly can kick if events don’t run away from them.
matrignano said:
How’s that work then???
The spread tells you how much it costs to borrow money. Germany has to pay the markets about 0.4% to borrow money over a 10 year period. Italy has to pay the markets the spread number plus the German rate, so to borrow the same money they have to pay 3.6%
tter!!!!!, if they do then Brexit will be meaningless as there will be nothing to leave!!!!!!The longer it goes on the more of a lose - lose it is. By the sounds of it Italy are fully determined to implement their budget as there is no legal mechanism to stop them doing so but that will lead to punative measures and fines. If they bend over and prepare for penetration from Brussels by redrafting a budget that they are happy with (bye bye spending spree) it riles the italian people.
I think its a clever move by the Italin Gov, plays into their hands nicely given their eurosceptic stance. They have been careful to remain below the 3% target too.
It also kind of highlights how powerful France and Germany are in the EU, the big chasm between those two and the rest in terms of financial clout means they make the rules and break them freely enough, whilst the “poorer” countries are just caged animals being poked with a stick.
I think its a clever move by the Italin Gov, plays into their hands nicely given their eurosceptic stance. They have been careful to remain below the 3% target too.
It also kind of highlights how powerful France and Germany are in the EU, the big chasm between those two and the rest in terms of financial clout means they make the rules and break them freely enough, whilst the “poorer” countries are just caged animals being poked with a stick.
checkmate91 said:
So, forgive me here for not keeping up, the UK's liquidity tests have actually given the UK banking system competitive advantage? That's a good thing, right?
Well less risky, sure. Competitive? At the short end of the curve no, cost of production for UK, US other banks is much higher due to far higher prudential standards (the safety buffer kept to ensure they don't blow up the eceonomy). The EC keeps revisiting, non-reserve fractional reserve banking which becomes the ability to churn out leverage for free; and they are pushing back on implementing full loan loss provisioning unlike the UK (basically in Europe if a loan goes bad, they don't take the full hit but ammortise it across it's lifetime).They can also very easily turn retail deposits into long term loans to other banks, of which they are all connected.
Any spivvy wheeze you can get past your local regulator (It's a lot), keeps them making money but fundamentally erodes financial stability. The devil is in the detail, but Banks really are simple beasts, they have 2 core functions 1. Extend credit (leverage) 2. Maturity transformation (short term deposits into longter term loans).
Oh, and they are the on / off ramp for Monetary Policy so critical to keep the economy working- anywhere.
Whether anyone will lend to them and at what rate, will have an effect- but it's a safe bet that the Eurozone will bend or change rules to suit itself and its political survival.
If the mkt takes a dim view of EU zone banks, longer term effects are significant. I suspect that they will pay more and with higher haircut. This is a big issue at the macro level as the ECB losses the ability to steer the EU zone, as whatever stimulus they do is eaten up by increasing bank costs (Interbank financing). Man in the street pays more for credit, spends less and growth stalls.
The situation Italy presents is significant, its showing the existential threat to the whole EU project and CCY is at its heart. At a minimum and shorter term it's likely to force bank consolidation across the region (Deutsche & Commerz is pretty much a given), and possibly some form of nationalisation.
Edited by stongle on Thursday 25th October 08:19
All I want is my local Greek village bins emptying every week rather than at the present 6 to 8 week intervals, it's been one year now since the problem arose, everyday I see more litter about than there are people
I hope Italy follows the UK and gets out of the EU, Spain may then follow and surely the EU will then collapse
I hope Italy follows the UK and gets out of the EU, Spain may then follow and surely the EU will then collapse
jsf said:
matrignano said:
How’s that work then???
The spread tells you how much it costs to borrow money. Germany has to pay the markets about 0.4% to borrow money over a 10 year period. Italy has to pay the markets the spread number plus the German rate, so to borrow the same money they have to pay 3.6%Let's not forget, France is in a better position viz GDP growth and interest rates, but is not so much better and will bear the brunt of the Italian crisis. So that leaves just Germany is a financially sound position and as de facto leaders of the EU/ECB.
I see Stongle's argument about us being a potentially convenient ally and doing very well out of the deal, but I can equally see a scenario where it blows up in our face too.
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