Italian bond yields hit devilish high of 6.66 per cent

[James1:12]

http://www.telegraph.co.uk/finance/fina ... -live.html

"09.00 Jim Pickard, the FT's political correspondent, tweets:

Italian bond yields hit devilish high of 6.66 per cent ....be alarmed, very alarmed "

Greece, Italy who's next?

[James1:12]

10.00 We don't yet who the new Greek prime minister will be but market analysts are firmly focused on the next big thing - Italy.

Kathleen Brooks, research director at FOREX.com, summarises the problem in a note:

Italy has taken over from Greece as the headline grabber this morning after its 10-year bond yield surged above 6.5% and is currently running into some resistance just above 6.6%. This is considered bailout territory. Italy is the world’s third largest debtor and the Eurozone’s third largest economy.

Italy faces a major Parliamentary debate tomorrow to pass a raft of austerity measures, which is also being considered a vote of confidence in Berlusconi. The result of this vote will be crucial for risky assets, a no vote could see Italian bond yields surge and the euro and other risky assets plummet.

10.41 Conspiracy theories abound this morning, with speculation that the ECB is letting Italian yields soar to put pressure on Berlusconi to go.

Analysts at Citi note that the collapse of the government in Rome would be viewed as a positive development in the sovereign debt crisis. They write:

Whilst the political uncertainty is not welcomed by the markets, a Reuters’ survey of 10 fund managers showed that bond prices would recover and the yield spread over German bonds would fall by a full percentage point if Mr Berlusconi’s government should fall.

And getting rid of Silvio woul

[James1:12]

11.05 Silvio Berlusconi may step down within “hours,” according to an article written by former minister Giuliano Ferrara in the online edition of Il Foglio, news agency Ansa reported. “Some people say it could be minutes,” Ferrara wrote.

[James1:12]

13.30 Euro nations must "cede a little bit of authority, budgetary sovereignty" to overcome the crisis, Christine Lagarde, IMF managing director said.

“Critical decisions” have been made by the European Union to resolve the crisis,’’ Lagarde said in speech at Moscow’s State University of the Ministry of Finance. Ceding some sovereignty is required implement the deal “to the benefit of the global economy as a whole.”

She said the IMF may revise down global growth figures, she said. "The economy in general is in a dangerous and uncertain phase. There is clearly a darkening outlook, rising risks.”

[James1:12]

14.05 It's not just Italy which is getting a hard time today - Bruno Waterfield reports that Portugal, another bail-out recipient, has had a visit from the troika heavy mob, aka the IMF, the ECB and the EU.

He tweets:

@BrunoBrussels Troika officials arrived in Portugal today after govt called for 'understanding' on its plea for austerity terms to be relaxed

[4givenmuch]

WOW! Thanks for the posts :)

[James1:12]

Thanks 4givenmuch, the story of the Eurozone crisis is moving so fast, even if its off the headlins news. Yesterday went so quickly and now it seems Cyprus is in big trouble.

08.50 Moody's has downgraded three Cypriot banks.

Marfin Popular Bank drops three notches to Ba2, while Bank of Cyprus and Hellenic Bank both fall one notch to Ba1.

The ratings agency has already cut the nation down to Baa3 - any further and it will be considered junk, possibly forcing it to come to the eurozone looking for a bail-out.

Same link from the Telegraph.

Fiscal union is looking to be the only answer they will turn to, even then as a last resort. Shame, a bit of humility before the God of Israel by the leadership and people and each nation could watch this trouble pass over.

[James1:12]

10 EU "deviants" make new club:

10.37 George Osborne was at a "euro deviants" dinner last night. But it's not what it sounds like, explains Bruno Waterfield.

The Chancellor joined the nine other non-eurozone countries for a dinner in a fancy Brussels hotel, hosted by the Czechs.

A new name for the club - "the euro deviants" - has been coined after Jose Manuel Barroso, the commission president, explained that "not belonging is the deviation from the rule" because all EU members, bar Britain, are committed to eventually joining the single currency.

"Euro outs, euro deviants, we're not hiding the fact that we are not joining," said a British official.

Poland will step up its demand that that non-euro members are allowed to attend all eurozone meetings, a move that will annoy France.

Britain has not decided whether it will support the request.

The Swedes and the Danes suggested that as the eurozone was holding regular meetings so should the "euro outs" . But Osborne replied that while "the forum is useful it should not be made formal".

The EU's finance transaction tax was discussed, Britain's opposition is isolated within the wider EU but has strong support from the Swedes and Danes within the "deviants".

[James1:12]

Italy's done:

09.46 BREAKING NEWS

Italian 10-year bonds have breached the 'unsustainable' 7pc level. BBC's Robert Peston tweets:

Bailout almost inevitable - but eurozone's bailout fund is too small.

[James1:12]

11.51 German Chancellor Angela Merkel has said that the situation in Europe is so unpleasant that it's time for a breakthrough.

[James1:12]

12.20 Sweden has entered the fray. Its finance minister, Anders Borg (pictured below, centre), believes Italy should consider selling state assets to help reduce its debt burden.


Italy is fundamentally a state that has significant assets, which ought to mean that they have better possibilities to reduce their debt level

How about a new EU institution in Rome using the existing empty buildings?

[GodsStudent]

Isn't Vatican City in Italy? I understand that it owns untold amounts of gold and countless priceless other items.

[James1:12]

The Vatican is its own state so I would doubt Italy has any recourse to its resourses. I doubt the pope will let go of all that wealth!

[James1:12]

12.59 French bank SocGen: "Spain is now joining Italy on the radar screen".

12.48 Contagion fears are emerging once again. Spanish 10-year bond yields hit 6pc for the first time since August 5. Italian bond yields now at 6.6pc, rising today. UK's down to 2.2pc.