(Reuters) EU calls emergency meeting as crisis stalks Italy

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http://finance.yahoo.com/news/Exclusive-EU-calls-emergency-rb-2901098824.html?x=0&.v=4

European Council President Herman Van Rompuy has called an emergency meeting of top officials dealing with the euro zone debt crisis for Monday morning, reflecting concern that the crisis could spread to Italy, the region's third largest economy.

European Central Bank President Jean-Claude Trichet will attend the meeting along with Jean-Claude Juncker, chairman of the region's finance ministers, European Commission President Jose Manuel Barroso and Olli Rehn, the economic and monetary affairs commissioner, three official sources told Reuters.

Van Rompuy's spokesman Dirk De Backer said: "It's a coordination, not a crisis meeting." He added that Italy would not be on the agenda and declined to say what would be discussed.

However, two official sources told Reuters that the situation in Italy would be discussed. The talks were organized after a sharp sell-off in Italian assets on Friday, which has increased fears that Italy, with the highest sovereign debt ratio relative to its economy in the euro zone after Greece, could be next to suffer in the crisis. A second international bailout of Greece will also be discussed, the sources said.

The spread of the Italian 10-year government bond yield over benchmark German Bunds hit euro lifetime highs around 2.45 percentage points on Friday, raising the Italian yield to 5.28 percent, close to the 5.5-5.7 percent area which some bankers think could start putting heavy pressure on Italy's finances.

Shares in Italy's biggest bank, Unicredit Spa, fell 7.9 percent on Friday, partly because of worries about the results of stress tests of the health of European banks that will be released on July 15. The leading Italian stock index sank 3.5 percent.

The market pressure is due partly to Italy's high sovereign debt and sluggish economy, but also to concern that Prime Minister Silvio Berlusconi may be trying to undermine and even push out Finance Minister Giulio Tremonti, who has promoted deep spending cuts to control the budget deficit.

"We can't go on for many more days like Friday," a senior ECB official said. "We're very worried about Italy."

Monday's emergency meeting will precede a previously scheduled gathering of the euro zone's 17 finance ministers to discuss how to secure a contribution of private sector investors to the second bailout of Greece, as well as the results of the stress tests of 91 European banks.

GREECE

Greece is already receiving 110 billion euros ($157 billion) of international loans under a rescue scheme launched in May last year but this has failed to change market expectations that it will eventually default on its debt.

Senior euro zone officials worry that progress toward a second Greek bailout, which would also total around 110 billion euros, is not being made quickly enough and that the delay is poisoning investors' confidence in weak economies around the region.

"We need to move on this in the next couple of weeks. It's not a case of waiting until late August or early September as Germany is saying. That's too late and markets will make us pay for it," a top euro zone official told Reuters on Saturday.

German officials insist they too want to put together the second Greek bailout as quickly as possible, but the private sector's contribution is proving to be a major sticking point.

Germany, the Netherlands, Austria and Finland are determined that banks, insurers and other private holders of Greek government bonds should bear some of the costs of helping Athens. But more than two weeks of negotiations with bankers represented by the Institute of International Finance (IIF), a lobby group, have made next to no progress on agreeing a formula acceptable to all sides.

Initially talks focused on a complex French plan for private creditors to roll over up to 30 billion euros of Greek debt, buying new bonds as their existing ones matured. Around half of proceeds from Greek bonds maturing before the end of 2014 would be rolled over into very long-term debt while 20 percent would be put into a "guarantee fund" of AAA-rated securities.

But as that plan has floundered, Berlin has revived a proposal to swap Greek bonds for longer-dated debt that would extend maturities by seven years. Proposals to buy back Greek bonds and retire them have also been floated.

In a buy-back, the euro zone's bailout fund, the European Financial Stability Facility, might buy Greek bonds from the market, or the EFSF might lend Greece money to buy bonds. However, these schemes would require further changes to the EFSF's rules and would therefore have to go through national parliaments, an official source said.

SQUARE ONE

A senior euro zone official told Reuters on Friday that rather than progress being made in the talks with the IIF, as IIF managing director Charles Dallara has said, all sides were close to being "back to square one."

Dallara will attend the meeting of euro zone finance ministers in Brussels on Monday.

Since the euro zone's debt crisis erupted last year, the region's rich governments have aimed to limit it to Greece, Ireland and Portugal, which have signed up to bailouts totaling 273 billion euros -- a sum that is small compared to the financial resources of the zone as a whole.

Spain, commonly seen as the next potential domino in the crisis, has managed to retain its access to market funding through fiscal reforms. But because of the large sizes of the Spain and Italy, pressure on the euro zone would increase dramatically if those countries eventually needed financial assistance.
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I am so Glad Norway isn't pert of it. The whole thing feels its poorly managed and every country wants and expect some sort of rescue from EU now.
 
Here we go again!

All of Europe is being scammed. Like the US with its too big to fail banks, Europe will have to bail out everyone and take on massive debt to attempt to save the EU, and in the end countries will still default anyway. It's the exact same scenario as what happened in the US with banks, identical.

The strongest economies of Europe are going to be brought down to attempt to save the weakest, which will all default anyway. It's smart. This is how you make a rich person, poor. You invest his money in bad stocks.

How much are Europeans willing to enlarge their national debts just to "save face"?
 
Ether_Snake said:
Here we go again!

All of Europe is being scammed. Like the US with its too big to fail banks, Europe will have to bail out everyone and take on massive debt to attempt to save the EU, and in the end countries will still default anyway.
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The big difference is that the banks (in the US anyways) were given such painful terms that they have been accelerating the payback of their bailout and some have paid it off completely. The EU is coming up with terms, but they aren't really painful enough to force corrective change - on top of which each country is trying to hold onto their fiscal independence.
 
Phoenix said:
The big difference is that the banks (in the US anyways) were given such painful terms that they have been accelerating the payback of their bailout and some have paid it off completely. The EU is coming up with terms, but they aren't really painful enough to force corrective change - on top of which each country is trying to hold onto their fiscal independence.
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Careful there, the US bought toxic assets from the banks, and now we are supposed to believe that the banks gave back what they took? That's like I buy your car, and then you pay me what I paid you back, leaving you with nothing gained from this deal. You could have just sold the car instead then.

Oh but the US paid a price for the toxic assets that was inflated, hence the banks were getting money they would not have gotten otherwise on the market, and came out of this clean, while the US is stuck with the toxic assets.

This is like you sell me your trash, and then give me my money back. You're the only one to benefit from this deal.

It's better than throwing money at countries that won't give it back, but it's still a scam in both cases.
 
Oh no. I hope that no financial elites are hurt by this and are able to protect themselves and make more money without any of that horrible democracy getting in the way.
 
All the while, the government is still procrastinating any serious cuts and dancing around the political zombie that is Berlusconi. Fucking shameful.
 
http://www.sun-sentinel.com/busines...arkettre76922a-20110710,0,5707161,print.story

Italy's government scrambled to present a united front and defend the embattled economy minister on Sunday, hoping to soothe market fears that triggered a sell-off in Italian stocks and bonds last week.

The sell-off, fueled in part by fears that Economy Minister Giulio Tremonti may be forced out, raised concern that market contagion worries might be shifting to Italy and set off alarm bells in the European Union, the ECB and the Bank of Italy.

The message appeared to have been heard in Rome, where top officials in Prime Minister Silvio Berlusconi's struggling center-right coalition appealed for unity to stop Italy being drawn into market turmoil that has hit Greece and Portugal.

"From tomorrow, we have the job of showing we are united and blocking the effort of speculators," said Paolo Bonaiuti, a government undersecretary and senior aide to Berlusconi.

"In the coming months we have to 120-130 billion euros of bond issues to deal with, so we need cohesion and united intent, it'll take effort to show that the markets are overdoing it."

Berlusconi, facing trial on corruption and sex charges, has been weakened by electoral losses and government infighting and has appeared increasingly at odds with his finance minister. Adding to his woes, a court on Saturday ordered his Fininvest holding company to pay an $800 million penalty to a rival.

Credited with shielding Italy from the worst of the financial crisis, Tremonti has appeared isolated within the government for his hard line on spending cuts.

He has also faced additional pressure after a corruption probe ensnared a close former adviser.

The premium investors demand to hold Italian debt rather than benchmark German bonds hit a euro lifetime high of 236 basis points on Friday after Berlusconi criticised the abrasive Tremonti in a newspaper interview for not being a "team player."

As fears spread that the turmoil hitting Greece could spread to Italy if the budget discipline imposed by Tremonti relaxed, yields on 10-year Italian bonds rose to 5.3 percent, close to what some bankers describe as a pain threshold of 5.5 percent.

At the same time, shares in Italy's biggest bank Unicredit sank 7.9 percent and Italy's blue-chip FTSE MIB index <.FTMIB> fell 3.5 percent.

Euro zone governments have made heavy enough weather of agreeing bailouts for small countries like Greece and Ireland and the consequences of the crisis affecting Italy, the euro zone's third largest economy, are incalculable.

"We can't go on for many more days like Friday," a senior official from the European Central Bank said. "We're very worried by Italy."

OVERCOMING INTERNAL DIVISIONS

The scare on what Italian newspapers called "Black Friday" appears to have strengthened Tremonti's position, with Umberto Bossi, the powerful leader of Berlusconi's Northern League coalition allies, praising him for "listening to the markets."

This week, parliament will begin debating an austerity package aimed at keeping Italy on track to bring its budget back to balance by 2014 and center-right officials urged an end to weeks of squabbling in the ruling coalition.

"The coalition has to avoid internal divisions that must be overcome at all costs and which can be resolved in better times," said Fabrizio Cicchitto from Berlusconi's PDL party.

Berlusconi met Tremonti on Friday for what was officially described afterwards as a "long and cordial" lunch and newspaper commentators expect a truce between the two -- for now.

"The apparent harmony that has been found again is a gesture of responsibility," Massimo Franco, an Italian commentator wrote in the Corriere della Sera newspaper.

"And the unanimous chorus with which the PDL -- usually irritated by his arrogant manner -- defended Tremonti confirms fears of the international consequences of his leaving."

Berlusconi himself was silent over the weekend and canceled two appointments to speak, which Bonaiuti pinned on the Fininvest court ruling.

How far Italian leaders have reassured markets will become clear when Italy taps the bond market on Thursday. Details of the auction will be released Monday. Barclays Capital expects it will be for 7.75 billion euros worth of government bonds.

Officially projected at 120 percent of gross domestic product this year, Italy's gross government debt is the second highest in the European Union, after Greece. But its projected budget deficit of 3.9 percent is below the EU average of 4.7 percent, and its private sector debt is not high.

Italy's 10-year government bond yield, at 5.28 percent, has risen near the 5.5-5.7 percent area that some analysts fear could start pressuring government finances.

It is now only 41 basis points below the yield for Spain, which was considered the next euro zone nation at risk of needing a bailout, but remains far below yields for crisis-hit countries such as Ireland, where the yield is above 13 percent.
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The Euro is pretty much dead if this keeps up, the politicians just haven't admitted it yet and quotes like these:
"We can't go on for many more days like Friday," a senior official from the European Central Bank said. "We're very worried by Italy."
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Just make things worse.
 
Everyone who has ever said "That's not how the economy works" needs to look around and realize that the way the economy works, isn't working.
 
darkwing said:
eh its too big to fail, if they can't afford to lose Greece, they can't afford to lose Italy too
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The current remedy, to pile debt on debt to pay old debts can't last forever. Are the Irish and Greek economies going to rebound anytime soon with higher unemployement rates and selling off valuable government assets for peanuts? Those countries are bankrupt now but pretty much worthless in a year or 2. And when shit hits the fan again, there won't be anything left to privatize or cut in government spending. The measures taken now are just working for the short term. It's gonna get ugly when the general public finds out that their pensions and savings have been wiped out during these last couple of years.
 
Everyone should bail out now. You know what's in your respective countries' futures: privatization, and austerity.

And for what? Since when is the state better off selling its best assets, if not only to pay off some debt to some other countries?

Europeans shouldn't let their countries being dismembered to be sold for pennies for the profit or the private sector, being left with nothing but debts.

In 10 years or so, watch some governments seize private land and corporations again, like in South America. 100% certain to happen.
 
http://www.reuters.com/article/2011/07/11/us-markets-forex-idUSTRE74U02L20110711

The euro plunged broadly on Monday and could continue to falter as fears mounted that Europe's debt crisis may spread to Italy, the euro zone's third largest economy.

European Union finance officials struggled to find ways to resolve Greece's debt crisis, galvanized by the growing threat of contagion to Italy.

The euro hit a four-month low against the yen and a six-week trough against the dollar. The Financial Times reported that some European leaders would consider letting Athens default on some of its bonds, adding to market anxiety.

"A default by Greece would be enough to set off a widespread sell-off in the financial market, but a default by Italy would be worse than Lehman," said Kathy Lien, director of currency research at GFT Forex in New York, noting the much greater level of exposure by big banks to Italian debt.

"With that in mind, Italy has a more realistic financial plan than Greece and is much better equipped to meet their debt obligations," she added. "However, that may not be enough to stop contagion fears which can be irrational at times."

European Central Bank Executive Board member Lorenzo Bini Smaghi, speaking at a conference, said Italy is clearly able to pay back its debt and will never default.

The euro slid to $1.3984, its lowest level against the dollar in six weeks. It last traded down 1.8 percent at $1.4012.

It is estimated that the top 91 banks have more than 100 billion euros worth of exposure to Italy, far more than Greece's debt, while banks hold more Italian debt than Spanish debt, Lien said.

The spread between yields on 10-year Italian and German government debt widened further on Monday.

Fears over Italy rippled throughout global financial markets, sending stocks sharply lower while U.S. Treasury bond and gold prices rose as investors sought safety.
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I find those who protest austerity hilarious. I'm hopeful Spain will avoid a financial collapse, so long as the demand for Spanish bonds continues.
 
UltimaKilo said:
I find those who protest austerity hilarious. I'm hopeful Spain will avoid a financial collapse, so long as the demand for Spanish bonds continues.
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It is not austerity when they are fucking over the little man and giving his money to the fat cats. I understand that there is a need for austerity, but what they are doing is middle ages-like pillaging.

Socialize losses, privatize profits.

Edit: That said, I do hold the citizenry accountable for much of what is happening. When you elect a slime ball like Berlusconi time after time, you deserve what will inequivocally come to you. Some of it, at least.
 
The time is coming.

It is time to hit the big red button and reset the world economy..
reset-button%2B%25281%2529.jpg
 
Amir0x said:
please don't happen before I get to go next year
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Best time for it to happen from a foreigner's perspective, stuff instantly becomes much cheaper during hard times. Your costs for travelling and such will be much lower...
 
zomgbbqftw said:
Best time for it to happen from a foreigner's perspective, stuff instantly becomes much cheaper during hard times. Your costs for travelling and such will be much lower...
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i'm more worried about political unrest

dont want to get into no riots and shit
 
Amir0x said:
i'm more worried about political unrest

dont want to get into no riots and shit
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I was in Greece last year when the riots happened. Never saw one hint of the crisis yet it was at its peak. Euro was at 127$CAD.

It saved me a lot of money.
 
You shouldn't be worried Amirox, we're not much of the rioters here. If anything, many are calling for a faster response and higher cuts.
Weren't you coming this september anyway? Did you decide your destinations?
 
sohois said:
Hopefully the crisis will force Europe closer towards such an outcome.
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No chance in hell. It will do the opposite, and fuel nationalism.
 
sohois said:
Hopefully the crisis will force Europe closer towards such an outcome.
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I'm ditching my can/us dual citizenship day one post-grad if that occurs. Let a dreamer dream :(

*plays ode to joy*
 
TacticalFox88 said:
European Federation....it's the only way.
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That's a mirage... We need quick and decisive solutions to this problem. Everyone was saying that contagion was a serious possibility from the moment Greece and then Ireland asked for external help. European countries didn't have a concerted position to react to that and let the situation reach this point due to their indecision. I honestly can't say what will get us out of this mess. It saddens me as a Portuguese that even if we put in place every policies and measures that were negotiated with the institutions that lend us money we can nevertheless fail to reenter the markets in 2 years. As our Finance Minister answered when asked what Portugal needed to have to surpass this crisis: "Luck. We need luck."
 
Funky Papa said:
It is not austerity when they are fucking over the little man and giving his money to the fat cats. I understand that there is a need for austerity, but what they are doing is middle ages-like pillaging.

Socialize losses, privatize profits.

Edit: That said, I do hold the citizenry accountable for much of what is happening. When you elect a slime ball like Berlusconi time after time, you deserve what will inequivocally come to you. Some of it, at least.
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You're just a Milan hater. :lol
 
Ether_Snake said:
Here we go again!

All of Europe is being scammed. Like the US with its too big to fail banks, Europe will have to bail out everyone and take on massive debt to attempt to save the EU, and in the end countries will still default anyway. It's the exact same scenario as what happened in the US with banks, identical.
Click to expand...
This. It's all just one big fucking scam.
 
Ether_Snake said:
Careful there, the US bought toxic assets from the banks, and now we are supposed to believe that the banks gave back what they took? That's like I buy your car, and then you pay me what I paid you back, leaving you with nothing gained from this deal. You could have just sold the car instead then.

Oh but the US paid a price for the toxic assets that was inflated, hence the banks were getting money they would not have gotten otherwise on the market, and came out of this clean, while the US is stuck with the toxic assets.

This is like you sell me your trash, and then give me my money back. You're the only one to benefit from this deal.

It's better than throwing money at countries that won't give it back, but it's still a scam in both cases.
Click to expand...


Well, we will soon be able to sit back and watch first hand what happens when bailouts fail.
 
Gallbaro said:
A strong currency for northern european countries would bring instant recession.
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Afaik, it was over 20 years ago the Swedish Krona was as strong as it is today.
 
faridmon said:
I am so Glad Norway isn't pert of it. The whole thing feels its poorly managed and every country wants and expect some sort of rescue from EU now.
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Norway was the only European country that didn't fall into recession too.
 
Bu-but Estonia just got the Euro last year... do you mean we'll have to give it away again after the inevitable happens?

Sad+Smiley.png
 
The thing that would amuse me if it wasn't so scary is that in Europe governments have managed to persuade the people it's all the banks fault and nothing to do with the fact they have spent years buying of the electorate and unions by borrowing money they wouldn't have to repay themselves.
 
TacticalFox88 said:
Jesus Christ, is there a European country NOT fucked up finacially?
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Scandinavia is doing pretty well. At least Sweden is, and of course also Norway (dat oil). Not as sure about Denmark, but I believe they also have their shit pretty much under control.
 
TacticalFox88 said:
European Federation....it's the only way.
Click to expand...

It would be glorious, with a population and GDP higher than the United States. A true superpower. A political entity to fight for localization of niche Japanese games.
 
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