The italian public debt

Today, November 29th 2010 was not a great day for the stock and the bonds market in EU.

In particular, the Italian government bonds (BOT, BTp, CCT, CTZ) has dropped a lot but the reason is not clear.
Today Italy has successfully completed the placement of two major tranches of its debt.
The rates were in line with the market ones and all the debt was allocated.

Maybe the speculation is trying to attack Italy ? Who knows...

Let me know that Italy is not Ireland, neither Greece or Portugal.

Italy has an HUGE debt.
It's Debt/GDP at the end of 2009 was at 116% and probably at the end of the current year will be worst.
If Italy comes under the same kind of attacks that hit Greece and Ireland, the EU will face the mother of all the crisis. There will be no EU fund ready to bailout Italy and this could sign the end of the Euro.

Luckly the italian government has no more long term debt to finance until the end of the 2010, and in 2011 will have to refinance a total debt lower that the one re-financed during 2010.

High rates for Ireland bailout ?

The EU, ECB and the IMF have decided to bailout Ireland.

The total amount of the bailout is 85bn Euro.  
50bn Euro are for the public deficit, 35bn are for the banks, but what is the bailout price for Ireland ?

The EU will lend money at 6%.
The IMF will lend money at 3,4%


The rates look very high for a bailout plan.
If we want to help someone in trouble with its debts, we should lend him money at a low rates, isn't it ?
Probably Irish Government will find rates doubled to finance its debt on the market but this is not a good reason to lend them money at 6% when the ECB rates on the main refinancing operations is at 1%.

Maybe have we forgotten that over two years ago, Minister for Finance Brian Lenihan guaranteed all of the deposits and other liabilities of all of the Irish banks, and the the problem we are facing nowadays are sons of that intervention ?

Maybe we forgot that the banks, all the EU banks, since the Lehman Brother collapse, are refinancing themselves directly at ECB through the LTROs and the MROs...for unlimited amount and at 1% fixed rate.

Can somebody explain me why the banks should pay 1% for liquidity and a EU member State should pay 6%, cut the public employees wages, cut the welfare state and so on ?

This EU is just a bank and a money matter. Money comes firts than people.
It's time to change.

The longer term refinancing operations of the ECB

One of the main focuses of this blog is the tracking of the ECB's LTROs.

On November 25th 2010, one LTRO becomes to maturity.

The LTRO that comes to maturity has the following characteristics:
Start date: August 26th 2010
Duration: 91 days
Amount allotted: 19083,85 million Euros.



It will be replaced by the following one:
Start date: November 25th 2010
Duration: 91 days
Amount allotted: 38210,74 million Euros.

 The ECB liquidity in circulation due to LTROs is 345249,55 million Euros.

Remember that on May 27th 2010 the ECB liquidity in circulation due to LTRO operation was 701793,30 million Euros.

Maybe something is going better, for the liquidity market, since May 2010 re the banks does not need so much liquidity because the real economy does not need it. Who knows...

The PIIGS problems does not allow to the ECB to proceed quickly to tighten its monetary policy.

The ECB can't raise the interest rate and shall be very cautios to provide to the banks all the liquidity they needs, through the MROs and the LTROs...obviously at the fixed rate of 1%.

One of the major signals we have to waiting fore, to be sure that the crisis is really over, is the return to the auction system for the assignement of the funds through the MROs and the LTROs.