How long before we find out what Draghi's infamous " whatever it takes " statement really means ? Some say after the German Elections , we shall see the French ask for ECB bond buying support - and that is when we shall see what Draghi does rather than just says.... And of course , that assumes the Italians and Spaniards aren't beating down Draghi's door fro bond buying support at the same time.......

http://globaleconomicanalysis.blogspot.com/2013/07/former-ecb-chief-economist-warns-ecb.html

Former ECB Chief Economist Warns "ECB Will Soon Have to Support France with Bond Purchases"

Juergen Stark, former ECB chief economist (who resigned in 2011 over a dispute regarding bond purchases), says in an interview in Handelsblatt "The Euro crisis will worsen in late autumn"

Via Google Translate

 A year ago, ECB chief Draghi announced plans to do anything to save the euro. The former ECB chief economist Juergen Stark considers this fatal. He fears that the ECB will soon have to support France with bond purchases.

"I think the crisis will come to a head in late autumn. We are entering a new phase of crisis management, "Stark told the Handelsblatt (Friday edition). After the parliamentary elections in late September that France would increase the pressure on the ECB and Germany. The government bond purchase program OMT should actually be used in Spain and Italy. "But the pressure will be enormous, use the instrument in France. And without that, the country must go to the rescue, "said Stark.

A year ago the head of the ECB, Mario Draghi announced in London to do anything to save the euro. A little later, he presented the plans for the bond purchase program OMT.

Draghi bought the governments in Europe time. "But this time was wasted," Stark said.

Mike "Mish" Shedlock

http://globaleconomicanalysis.blogspot.com/2013/07/euro-sucks-italian-blood-prime-minister.html

Sunday, July 28, 2013 12:57 PM

Euro Sucks Italian Blood; Prime Minister Blames Tax Evasion; Reflections on Italy's Shadow Economy

This summer a private air plane has been flying over Italian beaches with a banner message Euro is Sucking Italian Blood



The article states "Italians have only one solutions to fight against this situation : leave Italy."

No End in Sight to Italy's Economic Decline

Der Spiegel says No End in Sight to Italy's Economic Decline 

 The Italian economy may be the third largest in the euro zone, but it is also plagued by inefficiency and continues to shrink. The country's political leadership has proven unable to implement badly needed reforms and the future looks grim.

Italy, despite being the third-largest economy in the euro zone after Germany and France, finds itself in dire straits, having been in decline for years. Its GDP has dropped by 7 percent since 2007. The last few years, says Gianni Toniolo, an economics professor in Rome, represent "the worst crisis in (the country's) history," even more devastating that the period between 1929 and 1934.

Some sectors have lost even more capacity, with the automobile industry having declined by 40 percent. According to Paolazzi, Italy is experiencing an "unprecedented process of deindustrialization."

But why?

Wages aren't the problem. They are 15 percent lower than Belgian and French wages and 30 percent lower than wages in Germany, according to a current Bank of Italy comparison. But according to Confindustria, the Italian economy faces a tax burden that is 20 percent higher than in Germany. And unit labor costs are about 30 percent higher than German levels, say central bank officials.

The CGIA research institute in Mestre, near Venice, found that one in two small businesses was only able to pay its employees in installments. Three out of five companies are forced to take out loans to pay their high tax bills.

In addition to the tax burden, a bloated bureaucracy obstructs almost all economic activity, an inefficient judiciary deters potential investors with trials that can last for decades. Italy has a relatively low education level and a poor infrastructure characterized by potholed streets, an energy supply prone to failure, constantly delayed trains and outmoded communication networks.

As a result, Italy continues to fall behind internationally as a place to invest. It is now 44th in the World Competitiveness Center (WCC) ranking, below the Philippines, Latvia, Russia and Peru, and only slightly above Spain and Portugal.

Populists like Berlusconi and the founder of the "Five Star" protest movement, Beppe Grillo, are not the only ones advocating the most radical of all solutions for Italy's problems. The country has "a lot of vitality and great potential," says US economist and policy advisor Allen Sinai, but it can only benefit from these strengths "by withdrawing from the euro."

Structural Problems

The Euro is clearly a problem, but leaving the Euro without fixing the other structural problems will not fix anything.

Letta Declares War on Tax Evasion

The Telegraph reports Italian Prime Minister Enrico Letta pledges war on tax evasion

 Italian prime minister Enrico Letta pledged Wednesday to "fight relentlessly" against tax evasion in the recession-hit country, as the government pushed new growth measures through the lower house of parliament.

Letta blamed Italy's underground economy - which ranges from simple tax evasion to organised crime and accounts for some 25 percent of the overall economy according to most studies - for damaging competitiveness.

Reflections on Italy's Shadow Economy

Letta has things ass backwards. Tax evasion and the underground economy is not destroying Italy. Rather, Italy's massive underground economy is a symptom of the dysfunctional nature of the real economy.

The underground economy thrives because of high taxes, poor infrastructure, political favoritism, and inane labor rules.

A crackdown on tax evasion (a symptom of the problem, not the problem) will only make matters worse.

Only Hope is Bankruptcy 

For more on Italy, please note the opinion of Enrico Colombatto, Professor of Economics at the University of Turin who says "Only Hope For Italy is Bankruptcy".

Mike "Mish" Shedlock

Read more at http://globaleconomicanalysis.blogspot.com/2013/07/euro-sucks-italian-blood-prime-minister.html#tqyVjhwOpdAShT3K.99