Saturday, September 28, 2013

Italy Government in crisis - Berlusconi PDL Ministers resign ! Italy follows Greece is escalating political crisis !

http://www.zerohedge.com/news/2013-09-29/ceo-italys-largest-bank-surprisingly-resigns

( When it rains it pours.... )


CEO Of Italy's Largest Bank Surprisingly Resigns

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Submitted by Tyler Durden on 09/29/2013 18:05 -0400



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The situation in Italy appears to be going from bad to worse. With a confidence vote pending for Tuesday as the government dissolves into chaos for the umpteenth time, and following the resignation of the CEO of one of Italy's largest non-financial corporations (Telecom Italia), the largest bank (by assets) in Italy -Intesa SanPaolo has announced - effective immediately - the resignation of its CEO and replacement with Carlo Messina. According to sources, the now former CEO had lost the confidence of shareholders (which is odd given the bank's stock is near 2-year highs). We can't help but wonder Ayn Rand-like at the devolution of the ruling class in Italy and what happens next (in light of the crumbling manufacturing and production data).

As we noted previously, things do not look so good for Italy (as a reminder the 3rd most indebted nation in the world)...
Italy’s Stability Program targets a 5%-6% primary budget surplus, and 3% nominal GDP growth. Both strike JPMorgan's Michael Cembalest as unrealistic in the context of post-crisis Italy. Italy ran a 6% surplus for a brief moment in the 1990’s but it didn’t last, as it was the result of a prior devaluation helping growth, some asset sales and some tax increases. Only asset sales seem feasible in Italy right now, if anything.

If Cembalest's concerns are correct,Italy will remain a country with almost twice the debt/GDP ratio as the US; unbreakable interdependency of the government, the banks, and the ECB; and low GDP and employment growth. If history is any guide, he will be right as the last few years have seen the biggest collapse in Italian GDP since The Unification in 1861...




Source: JPMorgan

The question remains - why no tearing of the social fabric? Or is this diminution of the ruling elite about to bring reality back to the masses?






http://www.zerohedge.com/news/2013-09-29/when-hope-fails-why-italian-banks-better-be-praying-draghi-can-still-do-whatever-it-


When Hope Fails: Why Italian Banks Better Be Praying Draghi Can Still Do "Whatever It Takes"

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Submitted by Tyler Durden on 09/29/2013 13:43 -0400




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When back in July 2012 Mario Draghi, on the verge of yet another Eurozone collapse, promised the world that he would do literally"whatever it takes" to defend the Euro, banks in the insolvent continent took his promise seriously, and ramped up their participation in the most epic Ponzi scheme conceived in Europe to a whole new level. The scheme, of course, was one where banks would buy sovereign bonds issued by their host country (most notably Spain and Italy), and subsequently repo them back to the ECB for near full cash (net of a minuscule haircut) collateral.
The problem for these same banks, is that while they engaged in the greatest ECB-backstopped leap of faith ever, and scrambled to buy every last piece of insolvent paper they could find, even as the host governments engaged in absolutely no structural reforms and raked up new record amounts of debt - while certainly wasting no time in blaming (f)austerity for every political failure due solely to their corruption and incompetence - the ECB had no real deus ex machina up its sleeve. What it did have is an imaginary "forward guidance" construct - a monetary "all in gamble" backed by what little faith in the ECB remained - dubbed the OMT (or the Outright Monetary Transactions) program, its only purpose was to boost confidence and to force the selling wave to end, replacing it with mindless buying.
It succeeded for a while.
The biggest drawback of the OMT, however, is that it was never actually meant to be put into operation, and a year and a half after its inception, there is still no legal term sheet, or conditionality framework, in which it would be enacted into practice. The reason is simple: the OMT was never supposed to be actually enacted as an outright, unsterilized monetization mechanism, and certainly not before the Merkel re-election. Doing so who destroy any chance the Chancellor had of storming to the top, as it would become clear to Germany that the only possible fallback plan Europe has, is to jump head first in a strategy made quite clear by both the Fed and the BOJ, namely epic, unbridled unsterilized monetization of debt, bringing those so painful Weimar Republic flashbacks with it. Something Germans is all too familiar with.
In other words, beginning in July 2012, Europe's only strategy became hope. Hope that nothing bad would ever again happen. Hope that monetary policy can mask the absolute failure that fiscal policy across the continent (and world) had and has become. Hope that nobody ever calls the bluff of either the ECB, or the global central bank syndicate.
Over the weekend, Silvio Berlusconi just called that bluff by telling his ministers to submit their resignations.
What happens next is unclear. What is clear is that as the chart below shows, Italian banks now own €400 billion, or a record amount of Italian sovereign paper, four times more than before the crisis. While this strategy worked miracles while everyone was behind Draghi, now that Italy has hit a dead end, and hope as a strategy has failed, the simple game theoretical question is: will he who sells first (again), sell best? The answer will depend on whether Italian banks can mangle accounting rules, and like the ECB pretend they have no Mark-To-Market concerns about bond prices.
If enough bonds were purchased and moved to "Held To Maturity" accounts, then perhaps a selling avalanche can be avoided. If not, then Mario Draghi's OMT is not only about to be tested, but once said test fails, the ECB president will be scrambling to come up with even bigger and more bombastic promises that all shall be well. Alas, since he already has gone "all in", one can see why things may be a little more different this time.
Finally, with hope no longer a strategy, perhaps none other than Italy's Prime Minister has shown what the only remaining "option" for Italy is.  As Bloomberg reports, Letta, facing a collapsing government, spoke at a conference organized by a Christian charity group earlier today. During his speech, he got applause after asking audience to pray for Italy.  He said "We will give it our all because we are hyper determined, but allow me to add that if you find yourself saying some prayer for Italy in these three days, it will certainly be useful to us."
And there you have it: when hope fails, there is still that one final fallback. Prayer.






http://www.zerohedge.com/news/2013-09-29/berlusconi-has-last-laugh-italy-scrambles-contain-fallout-government-collapse


Berlusconi Has Last Laugh As Italy Scrambles To Contain Fallout From Government Collapse

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Submitted by Tyler Durden on 09/29/2013 12:19 -0400



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Following yesterday's unexpected (if not shocking) news that ministers from Berlusconi's PDL have resigned en masse in order to push for new elections, leading to the latest Italian government crisis (in a long and distinguished series), Italy's premier Letta and president Napolitano are scrambling to preserve some stability, and not only they but moments ago Ansa reported that the management and supervisory boards of Italian megabank Intesa are set to meet at 6 pm, as not even the most optimistic see an easy way out of the political dead end Italy has found itself in now.
And while everyone's attention will be drawn to the financial markets' response, even as everyone knows another Italian - former Goldmanite and head of the Bank of Italy and current head of the ECB, Mario Draghi - has those under control (just think of all the "political capital"), the political situation is indeed very serious. So while the ECB will try to do "whatever it takes" to preserve stability, the math on the ground is far more problematic. According to a Corriere della Sera reports, citing its own calculations, PM Letta needs to find 24 votes to win a possible confidence vote in Senate next week, Letta can count on 137 senators without former premier Berlusconi’s party and its allies. He needs 161 votes to win in the 315-seat Senate as the upper house also has 6 senators for life. Should the confidence vote not pass, he will have no choice but to resign leading to the second Italian elections in seven months.
Which is why as Reuters further reports, Letta will meet the president on Sunday in a few minutes, at 6 pm local time, "to try to chart a way out of a deep political crisis after Silvio Berlusconi pulled his ministers out of the government and called for new elections."
President Giorgio Napolitano said he would only dissolve parliament as a last resort but just seven months after the last vote it is not clear if an alternative majority can be found.

Berlusconi, the centre-right former prime minister who was forced out of office in November 2011 at the height of the euro zone debt crisis and faces a ban from parliament for tax fraud, has already launched his election campaign.

Infighting among the left-right coalition government has thwarted efforts to push through reforms Italy needs to emerge from a two-year recession, a 2-trillion-euro public debt and youth unemployment of around 40 percent.

The political paralysis resulting from the government's collapse will delay those reforms even further in the euro zone's third largest but most sluggish economy.

"It is tradition for the president to dissolve parliament early when it isn't possible to create a majority and a government for the good of the country,"Napolitano told reporters ahead of his meeting with Letta. The prime minister will address parliament on the crisis early next week.
This being the political circus that is Italy, only very naive europhiles will be surprised that from a coalition member, Berlusconi promptly became the reason for the government collapse in just over half a year.
Berlusconi said he decided on the shock move on Saturday after the government's failure to avert a long-programmed hike in sales tax at a cabinet meeting the day before. Letta dismissed the motivation as a "huge lie," saying instead that the media tycoon, who celebrated his 77th birthday on Sunday, was acting out of fury at his impending expulsion from parliament following a conviction for tax fraud. With fears that markets will punish Italy for the political turmoil, all eyes now are on whether Napolitano can muster backing either for a second Letta government or for an administration led by another figure.

If not, Italy would be forced to return to the polls with a major risk that, with a dysfunctional electoral law and three parties of roughly equal size, they would produce a hung parliament and yet more instability. Berlusconi on Sunday called for new elections, but there were signs that some allies may not be willing to follow him.

"The only path to follow is to go with determination towards new elections," Berlusconi told a party gathering in Naples in a telephone link-up. "I am convinced that a government of taxes is not in the interests of our country." 

Economy Minister Fabrizio Saccomanni played down the risk that Italy's borrowing costs would shoot up when markets open on Monday, a danger highlighted by other cabinet members. "I think the uncertainty connected to the government's instability has been largely already factored in during the last few weeks," he told business daily Il Sole 24 Ore.
Somehow that does not explain why Italian banks are rushing in a panic to prevent a bond collapse at all costs. But at least they have experience: recall that it was Berlusconi's intransigence once again that caused Italian bond yields to hit record highs in November 2011, when Draghi refused to buy Italian bonds until Berlusconi quits, which he did ultimately to prevent the collapse of Europe (even as he was contemplating Italy leaving the Eurozone).
It is only fitting that Bunga Bunga has the final laugh.
As for the punchline:
"Markets have grown accustomed to Italy's dysfunctional politics but there's a sense that things are now spinning out of control, with potentially dangerous consequences for both Italy and the eurozone," said Nicholas Spiro, head of Spiro Sovereign Strategy.
Of course, nobody could have possibly foreseen this happeneing in a world in which all critical structural political decisions are henceforth deferred to the local central bank, in hopes it will do all in its power to avoid domestic political dysfunction from tearing the system down.
So get to work Mr. Draghi, or else all that political capital invested in a "No Plan B" Europe may suddenly evaporate.




Italy Government In Turmoil: Berlusconi's PDL Ministers Resign

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Submitted by Tyler Durden on 09/28/2013 12:35 -0400



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With everyone focused on the US government, and whether or not it would remain open past Monday, the real stunner has once again emerged out of left field, in this case Italy, where as Italian news agency Ansa reported moments ago, the ministers in Berlusconi's PDL party have followed through on their threats announced earlier this week, and have resigned.
Bloomberg reiterates:
  • BERLUSCONI'S PDL MINISTERS RESIGN, ANSA SAYS CITING ALFANO
  • BERLUSCONI ALLIES OFFER RESIGNATIONS FROM LETTA CABINET: ALFANO
  • Berlusconi Says PDL Ministers Should Offer Resignation: Ansa
  • BERLUSCONI SAYS LETTA'S ULTIMATUM UNACCEPTABLE: ANSA
On the other hand, in a world built on trial balloons and false rumors and disinformation, perhaps this is merely the latest example:
  • LETTA SPOKESWOMAN: 'NOT AWARE' OF PDL MINISTERS' RESIGNATIONS
Although subsequently it seems that Letta admits the PDL ministers did in fact resign:
  • LETTA SAYS PDL RESIGNATIONS AT FAULT FOR VAT INCREASE: SKYTG24
And some more flash headlines out of Bloomberg:
  • The govt’s situation is tough and confidence is needed, Ansa reports, citing President Giorgio Napolitano speaking in Naples.
  • Italy doesn’t need a “permanent election campaign”
  • Italy Halts Budget Decisions as Letta Seeks to Gauge Support
From Reuters:
All ministers from former prime minister Silvio Berlusconi's centre-right party resigned from the coalition government on Saturday, said a spokesman for Deputy Prime Minister Angelino Alfano.

Berlusconi had earlier told ministers from his People of Freedom (PDL) party to consider stepping down in protest at Prime Minister Enrico Letta's order to freeze all decisions ahead of a confidence vote in parliament.

"The ultimatum sent by the prime minister and his Democratic Party at their government allies ... seems inadmissable and unacceptable," Berlusconi said in a statement on Saturday.
The latest from ANSA, google translated:
'The ministers of the PDL resign his resignation'. He does know Angelino Alfano - through its spokesman - and said to speak on behalf of the entire delegation of the People of Freedom. Shortly before Silvio Berlusconi declared inadmissible the ultimatum of Letta and the decision VAT increase 'a serious breach' of the shareholders of government. 'I invited the delegation of the People of Freedom to the government to evaluate the opportunity to immediately submit his resignation not to be complicit, and not to make aided by the People of Freedom, a further hateful harassment imposed by the Italians left'. 'The decision taken yesterday by the President of the Council of Ministers Enrico Letta, to freeze the activities of government, thereby determining the VAT increase is a serious violation of the terms on which this government, contradicts the plan submitted to the Rooms by the Premier and would force us to violate its commitments to our voters during the election campaign and at the time when we voted confidence in this executive since we really wanted. "This was stated in a note Silvio Berlusconi, leader of the PDL." For these reasons, the ultimatum launched by the Premier and the Democratic Party allies to government on the skin of the Italians, it is inadmissible and unacceptable, "he adds." Therefore - he concludes - I invited the delegation of the People of Freedom to the government to assess the ' opportunity to immediately submit his resignation not to be complicit, and not to make aided by the People of Freedom, a further hateful harassment imposed by the Italians left "
So one week after the German election and already Greece has unleashed a historic crackdown against its third most popular party, and the Italian government may well have fallen.
Looks like the European summer vacation is officially over.


http://www.bloomberg.com/news/2013-09-27/italy-mulls-delay-of-vat-increase-to-january-as-cabinet-teeters.html



Italy Halts Budget Decisions as Letta Seeks to Gauge Support

By Chiara Vasarri & Lorenzo Totaro - Sep 28, 2013 10:15 AM ET
Italian Prime Minister Enrico Letta’s Cabinet delayed approval of key economic measures as political tensions in the coalition led the premier to seek to verify parliamentary support for his government.
“I am not available to continue without clarity” Letta’s office said in an e-mailed statement late yesterday.
Enlarge imageItalian Prime Minister Enrico Letta
Italian Prime Minister Enrico Letta told reporters in New York yesterday, “As soon as I land in Rome, I will go to Napolitano to discuss how we can go ahead.” Photographer: Scott Eells/Bloomberg
Enlarge imageFormer Italian Prime Minister Silvio Berlusconi
Former Italian Prime Minister Silvio Berlusconi, pictured, said on Sept. 19 that a government crisis would be negative for Italy now and that his party will continue to back Prime Minister Enrico Letta as long as he keeps to promises on tax cuts. Photographer: Franco Origlia/Getty Images
Letta’s administration suspended all key economic decisions pending a clear backing from the parties in the governing coalition, the premier’s office said. “There’s no guarantee of government and parliamentary continuity,” according to the statement.
Strains between former Premier Berlusconi’s People of Liberty party and Letta’s Democratic Party intensified this week as Berlusconi’s lawmakers threatened to resign en masse in the event that a Senate committee votes to expel him. Letta’s party says the expulsion of Berlusconi, who was convicted of tax fraud last month, is required under a law passed last year.
Ministers failed to pass a decree including a measure that would have postponed a value-added tax increase scheduled for Oct. 1 to Jan. 1, according to a draft of the proposal obtained by Bloomberg News. A delay of the VAT increase was one of the key planks in Silvio Berlusconi’s electoral campaign, along with the cancellation of a property tax on first homes announced last month.

Confidence Vote

A confidence vote in Parliament won’t be held before Oct. 1, Minister for Parliamentary Relations Dario Franceschini was cited by Ansa as saying at an event near Florence today. In that case, there won’t be enough time to avoid the VAT increase, Deputy Finance Minister Stefano Fassina said in a telephone interview. “The VAT increase is inevitable and the PD and Berlusconi are to blame,” he said.
The euro region’s third-largest economy has been a key concern for investors worried about the future of the euro. While European Central Bank President Mario Draghi’s pledge last year to do “whatever it takes” to shore up the currency has kept a lid on Italian bond yields, a political crisis has the potential to cause new turmoil across the region’s bond market.
Italy’s 10-year yield climbed 13 basis points, or 0.13 percentage point, this week to 4.42 percent at 5 p.m. London time yesterday, the biggest increase since the period ended Aug. 23.
Tensions between the coalition partners “represent a key risk to the economic outlook,” the International Monetary Fund said in a report before the Cabinet meeting yesterday. “Loss of market confidence could be significant and push Italy into a self-reinforcing bad equilibrium and protracted period of slow growth.”

No Alternatives

Berlusconi’s party has yet to decide whether it will express its support to Letta’s government, Il Messaggero reported today, citing Renato Schifani, PD chief whip in the Senate. Without the backing of his allies early elections would be the only option, as alternative majorities don’t seem to be an option, Messaggero reported, citing Schifani.
“Based on rational analysis, the collapse of Letta’s government is not convenient for Berlusconi,” Roberto D’Alimonte, a political science professor at Rome’s Luiss University, said by phone. “Berlusconi is just trying to take advantage of the situation by putting pressure on Letta and Italian President Napolitano to keep alive the attention on his case, also in the eyes of his electors, and to obtain more favorable conditions” for his penalty, he said.
Berlusconi, who turns 77 tomorrow, is unlikely to spend a day in jail for the tax-fraud verdict. His four-year prison sentence will probably be reduced to one year of house arrest or community service, due in part to leniency guidelines. The three-time premier is appealing separate criminal convictions for illegal use of wiretaps, abuse of office and paying a minor for sex. He has denied all charges, saying the trials amount to political persecution.
In an e-mailed statement today, Napolitano denied press reports Berlusconi didn’t respond to his phone calls. In a separate speech at an event near Naples today, the Italian President, who met Letta before yesterday’s cabinet meeting, stressed the need for stability, saying Italy doesn’t need a “permanent election campaign.”


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