Eurointelligence Daily Briefing, 21 de Junho de 2012. Enviado por Domenico Mario Nuti.

Berlusconi says Italy should quit eurozone unless Merkel changes course

  • Former Italian premier says leaving the eurozone is no blasphemy;
  • says three outcomes possible: Merkel allows ECB to grant unconditional backstop, Germany leaves, Italy leaves;
  • he says Merkel’s policy has thrown Italy into a recessionary spiral;
  • he claimed a number of German experts supported the idea that Germany quits the eurozone;
  • the FT writes that a failure of this Friday’s summit might seal Monti’s fate, and trigger early elections as Monti is losing political support;
  • Monti’s record in office is also being questioned by an increasing number of Italian economists;
  • Germany opposes Monti’s plan for bond purchases;
  • insists that any bond purchases would be tantamount to a full programme with a memorandum and control mechanisms;
  • Anatole Kaletsky says that Germany is once again a menace, and Europeans should stand up to them;
  • says Angela Merkel’s concept of a political union was hegemonial;
  • Wolfgang Munchau says German is in the grip of a mass hysteria similar to what happened in the run-up to 1933;
  • Ewald Nowotny, the Austrian central bank president, also invokes the rise of Nazism, which arose out of excessive austerity;
  • French PM Jean-Marc Ayrault says true debt mutualisation requires a political union;
  • Antonis Samaras is sworn in as Greek prime minister after the agreement on a three-party coalition between New Democracy, Pasok, and the Democratic Left;
  • Vassilis Rapanos becomes finance minister;
  • new government comprises of 15 ministers and 20 deputies, down from a total of 49;
  • Thomas Wieser, head of the euro working group, says Greek programme is totally off track: Greece needs either more money or needs to implements the agreed measures immediately;
  • the Irish Independent, meanwhile, draws a parallel between the current situation and Scotland’s Darien crisis 1699-1701, in which Scotland lost a fortune through speculation in Panama, and which was ultimately result through the political union with England. 

Ok, he is no longer Italy’s prime minister, but he is still the leader of one of Italy’s most important political parties. He said the eurozone crisis can have one of three outcomes. Either Germany allows the ECB to backstop everything. Second, Germany leaves. Third Italy leaves. Number is two is not going to happen, so we are left with the bifurcation we have forecasting for a long time. Either they agree a full backstop – which can logically only come from the ECB, and which in turn requires a political union – or the eurozone collapses.  

It all started with an entry on his Facebook page, (see also the report by Corriere della Sera) in which he said that if Germany does not agree a new role of the ECB, then it should consider leaving the eurozone, an option he had apparently discussed with a number of German experts. Alternatively, Italy and Spain should consider leaving the eurozone. He said it was not a blasphemy to discuss this option. He said his preferred option would be for the ECB should issue the guarantee of the banks, and issue bonds.



Corriere also has a reference to an interview of Berlusconi in the Wall Street Journal in which he clarified his position further. He said the departure of the a country from the eurozone, or even the collapse of the eurozone, were not subject to polite conversation in Europe until recently, but they are now possible. Here is a section from the excerpt of the interview:



“I see three possible outcomes. The first is that Germany is persuaded and therefore the ECB becomes a backstop for the euro. The second possibility is that Germany leaves the euro…The third solution is that Italy leaves the euro and we reintroduce our own currency, which would bring many advantages.”



And then he went on the attack against Angela Merkel:


“If we continue on with the policies of Signora [Angela] Merkel [the German chancellor], who before had the backing of Sarkozy, demanding that countries reduce their public debt, we’ll end up in a worsening recessionary spiral. This is really the wrong policy.”



(Discussing a euro exit is still considered blasphemy by centrist European parties, especially in Italy. So this is an important statement, as he is still an influential political leader. It is also a sign that the anti-euro campaign by Beppe Grillo is having an effect.)


FT says Monti’s government at risk if summit fails to come up with a good result



The FT writes from Rome that this Friday’s summit is crucial not only for the eurozone, but also for himself. If he does not secure major concessions, he will come under intense pressures to resign. Berlin remains cool on the idea of ESM bond purchases (and in any case it would not solve Italy’s problem in the absence of an ESM banking licence.) The articles a reference by an Italian academic who criticised Monti for failing to do enough for growth – the country was now on the same trajectory as Greece was a couple of years ago.  


Germany opposes Monti’s plan for the euro rescue fund to buy crisis countries’ bonds



Germany opposes Mario Monti’s plans launched at the G20 to let the EFSF and the ESM buy the government bonds of countries under market stress such as Italy without any conditionality attached, Frankfurter Allgemeine Zeitung writes. German government sources quoted by the paper stress at the Los Cabos summit there had only been talk about the already existing possibility of the euro rescue funds to buy bonds, but under the existing rules this can only be done if the country that would benefit from the purchases signs an MoU and agrees to negotiated conditions. “There will be no purchases without conditions”, deputy government spokesperson Georg Streiter said according to FAZ. The Spokesperson of Olli Rehn said that the high interest rates in Italy could only be lowered by credible structural reforms and further consolidation efforts.


Anatole Kaletsky says Germany is once again the enemy



The attacks on Germany have been getting stronger. This is about as strong as we have yet read, and it comes from Anatole Kaletsky, one of the most influential Anglo-Saxon commentators, who has moved his column from the Times to Reuters. He says the European nations should stand up to German political hegemony:



“Merkel doubtless believes that she is helping Europe when she maternally instructs the Greeks, Italians and Spaniards to ‘do their homework’ and so become good little Germans. But like its less benign predecessors, this effort to impose German hegemony is guaranteed to fail. Europe’s leaders must therefore start considering a previously unmentionable question, perhaps as soon as next week’s summit, if the euro crisis intensifies. This question is not whether Europe will agree to live under German leadership, but whether Germany will agree to live under EU leadership – or whether the other nations must form a united front against Germany to prevent the destruction of Europe, as they have repeatedly in the past…”



“To be specific, the euro’s only chance of survival now depends on a decisive move toward political and fiscal union. Angela Merkel plays lip service to such political union, even claiming that democratic accountability is her main condition for financial rescues; but what she means is accountability to German voters, German newspapers and German constitutional judges. She promises to ‘do whatever it takes to save the euro’ but vetoes anything that might actually work, claiming deference to German public opinion or national interests.”


Wolfgang Munchau on how Germany is once again subject to a mass hysteria similar 1933


Wolfgang Munchau starts his column with the question of how the SPD could have possibly come to support the policy of Heinrich Brüning in the 1930s. His answer is the development of a dominant social narrative at the time, which turned in a mass hysteria, which nobody could escape from. This is something one does not understand unless one actually lives through it, and it is now happening again – where a conservative narrative of the crisis remains unchallenged by the left, which is now repeating its biggest historic mistake. He says a solution of the crisis is not consistent with this narrative, whose pursuit is not in Germany’s self-interest as it would lead to ultimate bankruptcy – either a through a break-up or through  the pursuit of Merkel’s non-committal policies. He warns his readers to be careful what they wish for when a majority advocates an end with a shock than a shock with no end. He says that would depend very much on the nature of the shock, and he called that Germany’s “shock therapy” to end the depression brought the end of democracy.


Nowotny warns of excessive austerity by drawing parallels with the rise of Nazism 


Ewald Nowotny used historic parallels to the rise of Nazism in Germany to warn of the potential consequences of excessive austerity in the euro crisis countries, Süddeutsche Zeitung reports. According to the paper, the Austrian central bank governor said at a conference on Monday night that the tough consolidation measures of the late 1920s produced mass unemployment in Germany which in turn led to the collapse of democracy and the takeover of power by the Nazis. While Niall Ferguson and Nouriel Roubini had made the same argument in an oped recently, this is the first time that a member of the ECB governing council makes this case. The paper says this is particularly awkward since the ECB is part of the troika that negotiates and controls the austerity measures and their implementation in the program countries.


Ayrault admits that Eurobonds first require further political integration



Talking to Die Zeit Jean-Marc Ayrault admitted that the introduction of Eurobonds first required much stronger political integration. “I hope that we will talk about Eurobonds in Brussels”, the prime minister said in reference to next week’s summit. “But it is true a mutualisation of debt necessarily requires a stronger political integration and that will certainly take several years.”


Samaras sworn in as prime minister, cabinet will be presented today



Antonis Samaras was sworn in as prime minister on Wednesday and his coalition cabinet is due to be named today.  Both PASOK and Democratic Left have refused to place senior politicians in the cabinet and nominate technocrats instead, a move which potentially weakens their commitment to the new government according to Reuters. The three leaders decided that the new government would comprise 15 ministers and about 20 deputy ministers, Kathimerini reports. This represents a substantial reduction from the 49 ministers and deputies that served under Lucas Papademos. PASOK will propose candidates for four ministers and as many deputy ministers. Democratic Left will put forward candidates for two ministerial posts and two deputy ministers. National Bank President Vassilis Rapanos, currently chairman of National bank, is being lined up to take over the post as finance minister. The FT describes him as a career public servant with close knowledge of Greek public finance and strong views on tax collection and how to combat tax evasion.



Kathimerini writes that caretaker Finance Minister Giorgos Zannias will represent Greece at Thursday’s Eurogroup meeting and that all three leaders would travel together to next week’s European Union leaders’ summit in Brussels. Greece will be aiming to convince the troika to give it two more years, until 2016, to reduce its public deficit below 3% of GDP. This would require an extra €16bn-€20bn in loans.


Wieser: Greek bailout deal totally off track, need for renegotiation



As a new Greek government takes office, the country’s second bailout programme is “totally off track, months behind schedule,” Thomas Wieser told AFP. Either you “stick to the fiscal targets and then you need additional measures” from Greece, or you change deadlines, in which case “you need extra money.” Wieser, who chairs preparations for politically-charged meetings of the Eurogroup, said the €130bn deal in new loans agreed in March was no longer workable.


A political union out of emergency, without citizens being asked



The Irish Independent has an interesting article comparing the Eurozone crisis with the Scottish Darien scheme (1699-1701), when Scotland lost significant money in a gigantic property speculation scheme in Panama and was bailed out by England in return for political unification. Here are some troubling questions, the article raises:



“The Euroland house is being built without a plan; just bricks stuck in when what is already there threatens to collapse…The troubling thing about such a union is that, if it happens in that way, eurozone citizens will never have been asked if they actually want it…Could a ramshackle financial union created in an emergency evolve into something more rational, with an acceptable degree of democratic representation and accountability. Would centralisation be matched by greater freedom for the member states to conduct their own economic affairs within the parameters laid down by the union?…Does Ireland still hold to its 50-year strategy of being an outlying, English-speaking but unambiguously European state?”

The article argues that withdrawal from core Europe would leave [Ireland] an impotent spectator of whichever way events unfold but it is a question the Irish need to consider now.


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Source: Reuters




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