25.02.2024

Why Italy carries a much greater threat than Turkey?

Italy and its debt problems can present a much greater threat than many experts think. And certainly the threat is much more serious than the economic problems of Turkey.

Last week the alarm was sounded the representative of the budget Committee of Italy. He actually said that the debt market in the country actually came out of control, and if the ECB will stop buying bonds in peripheral Europe, will launch an irreversible process and the Eurozone will collapse.

However, it is worth Recalling that the ECB announced a reduction of purchases of bonds of Eurozone countries in two times in October to 15 billion euros per month will fully complete the QE at the end of the year.

If the European regulator will keep my word, next year the Eurozone will lose their lender of last resort. To receive financial assistance will be possible only by reference to ESM. There are two important nuances.

The yield on 10-year government bonds Italy

First, to obtain the relevant assistance you need to obtain the approval of the Bundestag, where the voting takes place. Second, if the assistance will be allocated to the country will face strict requirements and restrictions.

“The problems are not only in Italy. Who will buy 10-year Portuguese government bonds, which have yields lower than U.S. treasuries when no one is Portugal?” – Telegraph cites the words of Claudio Borghi, Deputy of Tuscany and head of the budget Committee in the lower house of the Italian Parliament.

“We’re back where we were in 2011, when the crisis began. Instead of correcting structural problems in the Eurozone, they used a widening of the spreads of bonds as a weapon of mass financial destruction to overthrow the government and put their friends in power”, he added.

By the way, the spread between yields on ten-year Italian bonds and yields on ten-year bunds reached almost 300 points. If it is only in the last four sessions the index increased by 50 points.

Formally, this occurred against the backdrop of concerns regarding the Bank Unicredit, which has a big exposure to Turkey, but these much more serious concern is the looming budget showdown between Liga-Grillini and Brussels, scheduled for the autumn.

The Borg have long been a eurosceptic. Previously, he worked as a trader at Deutsche Bank, and now he offers to restore Florin the Medici as the new currency of Italy.

The country faces the risk of bankruptcy only because of a deformed structure of the European monetary Union does not allow her to have a lender of last resort, because this Union creates a deflationary trap for States that joined in with high levels of sovereign debt.

It is worth Recalling that Italy had a trade surplus with Germany, and two lost decades of Italy began when the European currency was recorded.

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