Month: November 2011

by: Nicholas Pardini
November 11, 2011

Starting in May of 2011, the extent of the global sovereign debt crisis began to hit the equity markets. Greece was first, then Portugal, then Ireland, and now Italy has become the focus of the financial markets and a source of macroeconomic weakness.

However, these countries are simply the first dominoes in a chain of fiscal crises that will either result in a series of defaults in the developed economies’ bond markets or high inflation generated by central bank intervention. The question now is who’s next? Countries with high debt/GDP ratios, high unemployment and lack high economic growth to sustain deficit spending are all about to face the consequences of reckless fiscal policies. Below I list the countries I believe to the most likely to enter sovereign debt crises of their own after Italy. Continue reading “First Greece, Now Italy, Who’s Next?: Analyzing The Sovereign Debt Default Chain”

By Nick Thompson
2011-11-09
CNN.com

(CNN) — Europe’s financial crisis claimed its second scalp in three days when Italy’s Silvio Berlusconi announced he will step down after parliament approves new austerity measures in an effort to stave off economic collapse.

The scandal-plagued prime minister will follow his Greek counterpart George Papandreou into early retirement as fears grow that Italy, the eurozone’s third largest economy, may default on its debt.

Italy has failed to implement austerity measures designed to reduce its mammoth €1.9 trillion debt load — nearly six times that of Greece — and the cost to the country of borrowing more money to pay off that debt is spiraling out of control.

While no one knows yet whether Italy will default, analysts say that the country is vastly too big to bail out — and that the consequences for the world economy of a default would be a disaster. Continue reading “Has Italy passed the point of no return?”

by Hugo Dixon
Reuters
Nov 6, 2011

Chaos, drama and crisis are all Greek words. So is catharsis. Europe is perched between chaos and catharsis, as the political dramas in Athens and Rome reach crisis point. One path leads to destruction; the other rebirth. Though there are signs of hope, a few more missteps will lead down into the chasm.

The dramas in the two cradles of European civilization are similar and, in bizarre ways, linked. Last week’s decision by George Papandreou to call a referendum on whether the Greeks were in favor of the country’s latest bailout program set off a chain reaction that is bringing down not only his government but probably that of Silvio Berlusconi too.

The mad referendum plan, which has now been rescinded, shocked Germany’s Angela Merkel and France’s Nicolas Sarkozy so much that they threatened to cut off funding to Greece unless it got its act together — a move that would drive it out of the euro. But this is probably an empty threat, at least in the short term, because of the way that Athens is roped to Rome. If Greece is pushed over the edge, Italy could be dragged over too and then the whole single currency would collapse. So, ironically, Athens is being saved from the immediate consequences of its delinquency by the fear of a much bigger disaster across the Ionian Sea.

Italian bond yields, which were already uncomfortably high, shot up after the Greek referendum fiasco. Continue reading “Chaotic catharsis”