Wednesday , May 31 2023

The (obvious) truce of spreading. The real risk comes from GDP and evaluation


The horizontal orientation has been and yet it seems that it does not continue anymore. The gap between the Italian and German ten-year bonds was 289 points yesterday (2.89%), twenty-five half-yearly levels, the opening in a runway unfolding in the next few years in mid-October. And if the Italian risk thermometer goes into a seemingly stable phase, at least one reason is: investors now have almost all the elements they have been waiting for in recent months.

The market now knows that the structure has a budget law, it has seen how the rating agencies that rated the debt were reacting, measured the economy's brakes. He also understood that the European Union is aggressive and that this information, combined, produces a spread of some 300 points. Italy is now paying Lisbon the same gap in returns that it suffered six months ago in Berlin, but at least recently, the uncertainty and volatility of government bonds has fallen. Someone in the government may be tempted to continue until the European elections in May. Deputy Prime Minister Luigi Di Maio said yesterday at Financial Times, Matteo Salvini's colleague often repeats: the populists will also win these elections, undermine the prevailing balance in Brussels and then change a lot. We still have to understand the way the road is coming from here and there, and if the market truce is as solid as it seems. It is not necessary, we judge from the next steps. In two days, the European Commission will publish its economic forecasts and those for Italy will be more pessimistic than the government: in 2019 the deficit is likely to be close to 3% of the gross product, possibly a slight increase in debt, % who says they believe the government itself. Between July and September, the Italian economy is stopping and all signs say this is happening in the last three months of the year. In October, industry PMI for the first time in years marks a contraction. also Ita-Coin, the Italian Bank's super index, which reported the slowdown for the first time, remains a zero growth in October.

The same loss of confidence means that capital continues to leave Italy in the meantime, as evidenced by the worsening balance of the balance of payments and intra-euro area payments system (Objective 2) from June to around 40 billion euros. It does not help the banks. Today, almost no one in Italy is able to issue bonds in the market to finance themselves – recently only Intesa Sanpaolo has done so – so the land for some of the smallest and most fragile institutions is not strong. In this context, the European Central Bank can help: discusses the launch in 2019 of a new Tltro, a targeted refinancing operation with longer-term liquidity and zero cost auctions.

Meanwhile, the government should set out the details of citizens' incomes and the counter-adjusting pension reform in music, with insufficient resources in relation to promises. Thus, in March and April, the first Fitch and then S & P will have to state whether the negative outlook just outsourced in Italy is turning into a downgrade to the last step before the downfall. All this, under the pressure of a European procedure on bills, which in the meantime proceeds with the threat of financial penalties. It seems likely that the May European may upset the balance of Brussels in favor of the populists: today, according to, in the European Parliament, the morning of a popular, socialist and liberal morning would have 55%, while the masters in Salvini would stop at 15 %.

There is still the possibility for the M5S-Lega government to take advantage of a cease-fire, to overcome the winter and to focus its goals. From today, however, for Europeans, it would be like crossing a minefield on two legs that do not move together.

November 5, 2018 (change November 5, 2018 | 23:17)


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