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buffalonate (94.38)

Italy's Austerity Package is a Joke!

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November 11, 2011 – Comments (6)

The markets went up big again today after the news that Italy passed an austerity package and economics reforms.  You realize that this rally was false enthusiasm when you look closer at the details.  They agreed to increase the retirement age 2 years many years from now.  They agreed to sell off about 13 billion worth of real estate and to sell off some government owned enterprises over the next 3 years.  Wow that is a decent gesture but it does nothing about their deficit now.  Italy's bond yields skyrocketed over the last week or so because they have 120% debt to GDP and no plans on how to balance the budget.  The only way Italy can get out of their crisis is to balance the budget now and not try to rely on half baked economic reforms to stimulate the economy.  The ECB has stabilized Italy's bond yields by buying bonds but they also stated that they can only legally do that for a short time and they don't have enough funds to handle a large bailout anyways.  I went short again because there is no solution to Italy's problems on the horizon.  I am going short again. 

6 Comments – Post Your Own

#1) On November 11, 2011 at 4:17 PM, RallyCry (< 20) wrote:

You are right on target. The maddening thing is trying to understand the rallies based on political posturing and cosmetic changes. I am sitting in cash as well until we see a 5-10% correction minimum. You can put lipstick on a pig.....

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#2) On November 11, 2011 at 5:14 PM, johnybottom (< 20) wrote:

I agree. There are basically two options on the table. Big defaults or big money printing. 

  

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#3) On November 11, 2011 at 5:29 PM, ikkyu2 (99.15) wrote:

If I have to kiss a pig, I'd prefer she put some lipstick on.

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#4) On November 11, 2011 at 5:43 PM, motleyanimal (85.49) wrote:

As long as they keep making that wonderful Fontina Val d'Aosta cheese they can do anything they like.

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#5) On November 14, 2011 at 11:47 PM, kirkydu (93.75) wrote:

while there are debt problems for sure in Italy, they are a very rich country.  Per Capita GDP and net worth are both very high.  Folks need to calculate accumulated wealth into the equation.  When you do that, you realize that the problems in Italy and broader Europe are quite easily solved once everybody agrees on how to gore the oxen.  The Europeans might screw around awhile yet, it's what they do since WWII, but ultimately they'll be fine.

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#6) On November 19, 2011 at 11:38 AM, buffalonate (94.38) wrote:

I have no doubt that Italy is rich.  I strongly doubt that they have the political will to balance their budget.  They are just like us.  They have money but don't have the political ability to solve big problems. 

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