Italy ready to beg for a Bailout

By LUIS MIRANDA | THE REAL AGENDA | JULY 17, 2012

The time for handouts doesn’t seem to end in Europe. After ‘solving’ the Spanish problems, the European bankers are now looking forward to ‘rescuing’ Italy from financial disaster. Italy will be the sixth nation to request and receive a financial bailout of its banking system before the country is officially absorbed by the international banking institutions that have, to a great extent, caused the current crisis.

Today, Italy is the third largest economy in the Euro zone and a shiny holder of a G-7 membership card. But that shiny membership is worth nothing as the Italians are also the third largest holder of sovereign debt. The debt to GDP ratio in Italy surpasses 120%. Italy’s dire situation has not been widely publicized due to the fact it is been hiding behind Spain’s  economically genocidal financial agreement with the bankers, which is the same agreement that Italian Prime Minister Mario Monti has in mind for his country.

Monti’s policies, although fairly accepted in his country, have failed to take Italy out of the hole. Instead of pulling the country out of the recession or depression — depending on who you ask — Monti’s so-called reforms aided a contraction of the economy by 0.8% in the first quarter of 2012. With such contraction also came the reduction in economic activity including the manufacturing, services and retail sectors. Retail sales fell below estimates in the past two months, and they are expected to continue the slide to levels between -0.8% and -1.6%.

The same measures taken by Spain before the bailout, a series of conditions imposed by the European bankers as a condition to start looking into a possible financial bailout of the Spanish banking system, were also applied by Monti’s-led government. Much austerity and the transfer of Italian infrastructure to the European lenders was the prelude to the upcoming rescue. Neither the people of Italy nor the markets liked Monti’s plan, but then again, it is not them who Monti works for, is it?

Despite the inevitability of the rescue, some issues have arisen regarding Italy’s standing in Europe and whether these conditions would be limiting when it comes to requesting and getting the funds to bailout its banks. For example, financial consultants cite the fact that the European Stability Mechanism has not been approved by all EU members. They also say that the current measures may not be enough to rescue Italy due to the fact its debt is much larger than that of Spain or Greece, for example.

“Placing Italy in a bailout scheme casts an even bigger shadow over the euro-zone,” says Yohay Elam at Forex Crunch. An Italian bailout, Elam says, would create a bigger hole in the debt crisis, because Italy itself has functioned as a supporter of past bailouts, so having to rescue the Italians would mean a larger burden for the region.

But neither Italy’s standing in Europe not the approval of the ESM by all countries is the big enchilada here. Italy will be absorbed by the banks just as Greece and Spain were. The matter is not if, but how. Should things run the bankers way as it happened with Greece and Spain, Italy will also have to surrender complete sovereignty to Brussels, as explained in the memo of understanding signed by both rescuers and rescues. “Spanish authorities will take all the necessary measures to ensure a successful implementation of the programme. They will also provide the European Commission, the ECB and the IMF with all information required to monitor progress in programme implementation and to track the financial situation.”

In the case of Spain, and most likely with Italy, Portugal, France and then Germany, Brussels will begin as a negotiator, but will end as a manager of all European economies. After receiving the proposals for financial bailouts, the World Bank, IMF, European Central Bank, the European Banking Authority and the Prime Ministers will sit down and agree to accept the request for aid and write the conditions for the rescues to occur. However, once the agreement is signed by all parties, the sole management of the programme falls on the hands of the ESM, a banker controlled institution.

Under the ESM, banking institutions that do not belong to large powerhouses will be either absorbed by mandating that they take bailout money, or dissolved. At this time, their assets will be given to the banks. The money that comes from the financial rescue will be given to partner banks, those who are owned by powerful European bankers, and the toxic financial assets will be re-circulated into other nations or financial entities. (MoU page 3)

Most likely, as in the case of Spain, Italy will have to meet the requirements established by the ESM, which are based on a timeline that begins at the signing of the MoU and goes well into 2013 and 2014. The rescue of banks in Spain may work as a model to be utilized in Italy. According to the MoU the losses incurred into by those participating in the financial rescue will be shared by equity holders and subordinated debt holders who may participate voluntarily of these losses, or otherwise be mandated to accept the mandatory Subordinated Liability Exercises (SLEs).

Through the execution of these supposed rescue plans, the European bankers also reassure their position and that of their decaying model as the only ‘legitimate’ way to take on the current crisis, even though that exact same model is the origin of the crisis itself. In Spain, for example, more independence is warranted to the Spanish Central Bank, which is a branch of the powerful European banking institutions.

“A further strengthening of the operational independence of the Banco de España is warranted. The supervisory procedures of Banco de España will be further enhanced based on a formal internal review,” says the MoU. The central bank will be more of a vigilante for the European bankers.

Bank-owned Moody’s downgrades Italy, Portugal sees UK and France Negative

Moody’s.com
February 2012

As anticipated in November 2011, Moody’s Investors Service has today adjusted the sovereign debt ratings of selected EU countries in order to reflect their susceptibility to the growing financial and macroeconomic risks emanating from the euro area crisis and how these risks exacerbate the affected countries’ own specific challenges.

Moody’s actions can be summarised as follows:

- Austria: outlook on Aaa rating changed to negative

- France: outlook on Aaa rating changed to negative

- Italy: downgraded to A3 from A2, negative outlook

- Malta: downgraded to A3 from A2, negative outlook

- Portugal: downgraded to Ba3 from Ba2, negative outlook

- Slovakia: downgraded to A2 from A1, negative outlook

- Slovenia: downgraded to A2 from A1, negative outlook

- Spain: downgraded to A3 from A1, negative outlook

- United Kingdom: outlook on Aaa rating changed to negative

Please see the individual country specific statements below for more detailed information relating to the rating rationale and the sensitivity analysis for each affected sovereign issuer.

The implications of these actions for directly and indirectly related ratings will be reported through separate press releases.

The main drivers of today’s actions are:

- The uncertainty over (i) the euro area’s prospects for institutional reform of its fiscal and economic framework and (ii) the resources that will be made available to deal with the crisis.

- Europe’s increasingly weak macroeconomic prospects, which threaten the implementation of domestic austerity programmes and the structural reforms that are needed to promote competitiveness.

- The impact that Moody’s believes these factors will continue to have on market confidence, which is likely to remain fragile, with a high potential for further shocks to funding conditions for stressed sovereigns and banks.

To a varying degree, these factors are constraining the creditworthiness of all European sovereigns and exacerbating the susceptibility of a number of sovereigns to particular financial and macroeconomic exposures.

Moody’s has reflected these constraints and exposures in its decision to downgrade the government bond ratings of Italy, Malta, Portugal, Slovakia, Slovenia and Spain as listed above. The outlook on the ratings of these countries remains negative given the continuing uncertainty over financing conditions over the next few quarters and its corresponding impact on creditworthiness.

In addition, these constraints have also prompted Moody’s to change to negative the outlooks on the Aaa ratings of Austria, France and the United Kingdom. The negative outlooks reflect the presence of a number of specific credit pressures that would exacerbate the susceptibility of these sovereigns’ balance sheets, and of their ongoing austerity programmes, to any further deterioration in European economic conditions and financial landscape.

An important factor limiting the magnitude of Moody’s rating adjustments is the European authorities’ commitment to preserving the monetary union and implementing whatever reforms are needed to restore market confidence. These rating actions therefore take into account the steps taken by euro area policymakers in agreeing to a framework to improve fiscal planning and control and measures adopted to stem the risk of contagion.

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Merkel and Sarkozy in Talks to End Eurozone

Fears that Italy’s fall may drag the whole region down, prompted the ‘strongest’ economies to think about doing away with the current shape of the Eurozone.

Guardian.co.uk
November 10, 2011

Fears that Europe’s sovereign debt crisis was spiralling out of control have intensified as political chaos in Athens and Rome, and looming recession, created panic on world markets.

Reports emerging from Brussels said that Germany and France had begun preliminary talks on a break-up of the eurozone, amid fears that Italy would be too big to rescue.

Despite Silvio Berlusconi‘s announcement that he would step down as prime minister once austerity measures were pushed through parliament, a collapse of investor confidence in the eurozone’s third-biggest economy sent interest rates in Italy to the levels that triggered bailouts in Portugal, Greece and Ireland.

Italian bond yields surged through the critical 7% mark, at one point hitting 7.5%, amid concern that the deteriorating situation had moved the crisis into a dangerous new phase.

In Athens talks to appoint a prime minister to succeed George Papandreou were in deadlock, and will resume on Thursday morning. The Italian president, Giorgio Napolitano, sought to reassure the markets by promising that Berlusconi would be leaving office soon.

Angela Merkel, the German chancellor, said the situation had become “unpleasant”, and called for eurozone members to accelerate plans for closer political integration. “It is time for a breakthrough to a new Europe,” she said. “Because the world is changing so much, we must be prepared to answer the challenges. That will mean more Europe, not less Europe.”

The president of the European commission, José Manuel Barroso, issued a new call for the EU to “unite or face irrelevance” in the face of the mounting economic crisis in Italy. “We are witnessing fundamental changes to the economic and geopolitical order that have convinced me that Europe needs to advance now together or risk fragmentation. Europe must either transform itself or it will decline. We are in a defining moment where we either unite or face irrelevance,” he said.

Senior policymakers in Paris, Berlin and Brussels are reported to have discussed the possibility of one or more countries leaving the eurozone, while the remaining core pushes on toward deeper economic integration, including on tax and fiscal policy. “France and Germany have had intense consultations on this issue over the last months, at all levels,” a senior EU official in Brussels told Reuters, speaking on condition of anonymity because of the sensitivity of the discussions.

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Libya: U.S. Government Propaganda and Media Lies

by Brian Becker
Global Research
August 24, 2011

Libya is a small country of just over 6 million people but it possesses the largest oil reserves in all of Africa. The oil produced there is especially coveted because of its particularly high quality.

The Air Force of the United States along with Britain and France has carried out 7,459 bombing attacks since March 19. Britain, France and the United States sent special operation ground forces and commando units to direct the military operations of the so-called rebel fighters – it is a NATO- led army in the field.

The troops may be disaffected Libyans but the operation is under the control and direction of NATO commanders and western commando units who serve as “advisors.” Their new weapons and billions in funds come from the U.S. and other NATO powers that froze and seized Libya’s assets in Western banks. Their only military successes outside of Benghazi, in the far east of the country, have been exclusively based on the coordinated air and ground operations of the imperialist NATO military forces.

In military terms, Libya’s resistance to NATO is of David and Goliath proportions. U.S. military spending alone is more than ten times greater than Libya’s entire annual Gross Domestic Product (GDP) which was $74.2 billion in 2010, according to the CIA’s World Fact Book.

In recent weeks, the NATO military operations used surveillance-collecting drones, satellites, mounting aerial attacks and covert commando units to decapitate Libya’s military and political leadership and its command and control capabilities. Global economic sanctions meant that the country was suddenly deprived of income and secure access to goods and services needed to sustain a civilian economy over a long period.

“The cumulative effect [of NATO’s coordinated air and ground operation] not only destroyed Libya’s military infrastructure but also greatly diminished Colonel Gaddafi’s commanders to control forces, leaving even committed fighting units unable to move, resupply or coordinate operations,“ reports the New York Times in a celebratory article on August 22.

A False Pretext

The United States, United Kingdom, France, and Italy targeted the Libyan government for overthrow or “regime change” not because these governments were worried about protecting civilians or to bring about a more democratic form of governance in Libya.

If that were the real motivation of the NATO powers, they could start the bombing of Saudi Arabia right away. There are no elections in Saudi Arabia. The monarchy does not even allow women to drive cars. By law, women must be fully covered in public or they will go to prison. Protests are rare in Saudi Arabia because any dissent is met with imprisonment, torture and execution.

The Saudi monarchy is protected by U.S. imperialism because it is part of an undeclared but real U.S. sphere of influence and it is the largest producer of oil in the world. The U.S. attitude toward the Saudi monarchy was put succinctly by Ronald Reagan in 1981, when he said that the U.S. government “will not permit” revolution in Saudi Arabia such as the 1979 Iranian revolution that removed the U.S. client regime of the Shah. Reagan’s message was clear: the Pentagon and CIA’s military forces would be used decisively to destroy any democratic movement against the rule of the Saudi royal family.

Reagan’s explicit statement in 1981 has in fact been the policy of every successive U.S. administration, including the current one.

Libya and Imperialism

Libya, unlike Saudi Arabia, did have a revolution against its monarchy. As a result of the 1969 revolution led by Muammar Gaddafi, Libya was no longer in the sphere of influence of any imperialist country.

Libya had once been an impoverished colony of Italy living under the boot heel of the fascist Mussolini. After the Allied victory in World War II, control of the country was formally transferred to the United Nations and Libya became independent in 1951 with authority vested in the monarch King Idris.

But in actuality, Libya was controlled by the United States and Britain until the 1969 revolution.

One of the first acts of the 1969 revolution was to eliminate the vestiges of colonialism and foreign control. Not only were oil fields nationalized but Gaddafi eliminated foreign military bases inside the country.

In March of 1970, the Gaddafi government shut down two important British military bases in Tobruk and El Adem. He then became the Pentagon’s enemy when he evicted the U.S. Wheelus Air Force Base near Tripoli that had been operated by the United States since 1945. Before the British military took control in 1943, the facility was a base operated by the Italians under Mussolini.

Wheelus had been an important Strategic Air Command (SAC) base during the Cold War, housing B-52 bombers and other front-line Pentagon aircrafts that targeted the Soviet Union.

Once under Libyan control, the Gaddafi government allowed Soviet military planes to access the airfield.

In 1986, the Pentagon heavily bombed the base at the same time it bombed downtown Tripoli in an effort to assassinate Gaddafi. That effort failed but his 2-year-old daughter died along with scores of other civilians.

The Character of the Gaddafi Regime

The political, social and class orientation of the Libyan regime has gone through several stages in the last four decades. The government and ruling establishment reflected contradictory class, social, religious and regional antagonisms. The fact that the leadership of the NATO-led National Transition Council is comprised of top officials of the Gaddafi government, who broke with the regime and allied themselves with NATO, is emblematic of the decades-long instability within the Libyan establishment.

These inherent contradictions were exacerbated by pressures applied to Libya from the outside. The U.S. imposed far-reaching economic sanctions on Libya in the 1980s. The largest western corporations were barred from doing business with Libya and the country was denied access to credit from western banks.

In its foreign policy, Libya gave significant financial and military support to national liberation struggles, including in Palestine, Southern Africa, Ireland and elsewhere.

Because of Libya’s economic policies, living standards for the population had jumped dramatically after 1969. Having a small population and substantial income from its oil production, augmented with the Gaddafi regime’s far-reaching policy of social benefits, created a huge advance in the social and economic status for the population. Libya was still a class society with rich and poor, and gaps between urban and rural living standards, but illiteracy was basically wiped out, while education and health care were free and extensively accessible. By 2010, the per capita income in Libya was near the highest in Africa at $14,000 and life expectancy rose to over 77 years, according to the CIA’s World Fact Book.

Gaddafi’s political orientation explicitly rejected communism and capitalism. He created an ideology called the “Third International Theory,” which was an eclectic mix of Islamic, Arab nationalist and socialist ideas and programs. In 1977, Libya was renamed the Great Socialist People’s Libyan Arab Jamahiriya. A great deal of industry, including oil, was nationalized and the government provided an expansive social insurance program or what is called a welfare state policy akin to some features prevalent in the Soviet Union and some West European capitalist countries.

But Libya was not a workers’ state or a “socialist government” to use the popular if not scientific use of the term “socialist.” The revolution was not a workers and peasant rebellion against the capitalist class per se. Libya remained a class society although class differentiation may have been somewhat obscured beneath the existence of revolutionary committees and the radical, populist rhetoric that emanated from the regime.

As in many developing, formerly colonized countries, state ownership of property was not “socialist” but rather a necessary fortification of an under-developed capitalist class. State property in Iraq, Libya and other such post-colonial regimes was designed to facilitate the social and economic growth of a new capitalist ruling class that was initially too weak, too deprived of capital and too cut off from international credit to compete on its own terms with the dominant sectors of world monopoly capitalism. The nascent capitalist classes in such developing economies promoted state-owned property, under their control, in order to intersect with Western banks and transnational corporations and create more favorable terms for global trade and investment.

The collapse of the Soviet Union and the “socialist bloc” governments of central and Eastern Europe in 1989-91 deprived Libya of an economic and military counter-weight to the United States, and the Libyan government’s domestic economic and foreign policy shifted towards accommodation with the West.

In the 1990s some sectors of the Libyan economic establishment and the Gaddafi-led government favored privatization, cutting back on social programs and subsidies and integration into western European markets.

The earlier populism of the regime incrementally gave way to the adoption of neo-liberal policies. This was, however, a long process.

In 2004, the George W. Bush administration ended sanctions on Libya. Western oil companies and banks and other corporations initiated huge direct investments in Libya and trade with Libyan enterprises.

There was also a growth of unemployment in Libya and in cutbacks in social spending, leading to further inequality between rich and poor and class polarization.

But Gaddafi himself was still considered a thorn in the side of the imperialist powers. They want absolute puppets, not simply partners, in their plans for exploitation. The Wikileaks release of State Department cables between 2007 and 2010 show that the United states and western oil companies were condemning Gaddafi for what they called “resource nationalism.” Gaddafi even threatened to re-nationalize western oil companies’ property unless Libya was granted a larger share of the revenue for their projects.

As an article in today’s New York Times Business section said honestly: “”Colonel Qaddafi proved to be a problematic partner for the international oil companies, frequently raising fees and taxes and making other demands. A new government with close ties to NATO may be an easier partner for Western nations to deal with.”

Even the most recent CIA Fact Book publication on Libya, written before the armed revolt championed by NATO, complained of the measured tempo of pro-market reforms in Libya: “Libya faces a long road ahead in liberalizing the socialist-oriented economy, but initial steps— including applying for WTO membership, reducing some subsidies, and announcing plans for privatization—are laying the groundwork for a transition to a more market-based economy.” (CIA World Fact Book)

The beginning of the armed revolt on February 23 by disaffected members of the Libyan military and political establishment provided the opportunity for the U.S. imperialists, in league with their French and British counterparts, to militarily overthrow the Libyan government and replace it with a client or stooge regime.

Of course, in the revolt were workers and young people who had many legitimate grievances against the Libyan government. But what is critical in an armed struggle for state power is not the composition of the rank-and-file soldiers, but the class character and political orientation of the leadership.

Character of the National Transition Council

The National Transitional Council (NTC) constituted itself as the leadership of the uprising in Benghazi, Libya’s second largest city. The central leader is Mustafa Abdel-Jalil, who was Libya’s Minister of Justice until his defection at the start of the uprising. He was one of a significant number of Western-oriented and neoliberal officials from Libya’s government, diplomatic corps and military ranks who joined the opposition in the days immediately after the start of the revolt.

As soon as it was established, the NTC began issuing calls for imperialist intervention. These appeals became increasing panicky as it became clear that, contrary to early predictions that the Gaddafi-led government would collapse in a matter of days, it was the “rebels” who faced imminent defeat in the civil war. In fact, it was only due to the U.S./NATO bombing campaign, initiated with great hurry on March 19 that the rebellion did not collapse.

The last five months of war have erased any doubt about the pro-imperialist character of the NTC. One striking episode took place on April 22, when Senator John McCain made a “surprise” trip to Benghazi. A huge banner was unveiled to greet him with an American flag printed on it and the words: “United States of America – You have a new ally in North Africa.”

Similar to the military relationship between the NATO and Libyan “rebel” armed forces, the NTC is entirely dependent on and subordinated to the U.S., French, British and Italian imperialist governments.

If the Pentagon, CIA, and Wall Street succeed in installing a client regime in Tripoli it will accelerate and embolden the imperialist threats and intervention against other independent governments such as Syria and Venezuela. In each case we will see a similar process unfold, including the demonization of the leadership of the targeted countries so as to silence or mute a militant anti-war response to the aggression of the war-makers.

We in the ANSWER Coalition invite all those who share this perspective to join with us, to mobilize, and to unmask the colonial agenda that hides under the slogan of “humanitarian intervention.”

Panic Alarms hit Italian Economy

European Council President Herman Van Rompuy has called an emergency meeting of top officials dealing with the euro zone debt crisis.

Reuters
July 10, 2011

European Central Bank President Jean-Claude Trichet will attend the meeting along with Jean-Claude Juncker, chairman of the region’s finance ministers, European Commission President Jose Manuel Barroso and Olli Rehn, the economic and monetary affairs commissioner, three official sources told Reuters.

Van Rompuy’s spokesman Dirk De Backer said: “It’s a coordination, not a crisis meeting.” He added that Italy would not be on the agenda and declined to say what would be discussed.

However, two official sources told Reuters that the situation in Italy would be discussed. The talks were organized after a sharp sell-off in Italian assets on Friday, which has increased fears that Italy, with the highest sovereign debt ratio relative to its economy in the euro zone after Greece, could be next to suffer in the crisis. A second international bailout of Greece will also be discussed, the sources said.

The spread of the Italian 10-year government bond yield over benchmark German Bunds hit euro lifetime highs around 2.45 percentage points on Friday, raising the Italian yield to 5.28 percent, close to the 5.5-5.7 percent area which some bankers think could start putting heavy pressure on Italy’s finances.

Shares in Italy’s biggest bank, Unicredit Spa, fell 7.9 percent on Friday, partly because of worries about the results of stress tests of the health of European banks that will be released on July 15. The leading Italian stock index sank 3.5 percent.

The market pressure is due partly to Italy’s high sovereign debt and sluggish economy, but also to concern that Prime Minister Silvio Berlusconi may be trying to undermine and even push out Finance Minister Giulio Tremonti, who has promoted deep spending cuts to control the budget deficit.

“We can’t go on for many more days like Friday,” a senior ECB official said. “We’re very worried about Italy.”

Monday’s emergency meeting will precede a previously scheduled gathering of the euro zone’s 17 finance ministers to discuss how to secure a contribution of private sector investors to the second bailout of Greece, as well as the results of the stress tests of 91 European banks.

GREECE

Greece is already receiving 110 billion euros ($157 billion) of international loans under a rescue scheme launched in May last year but this has failed to change market expectations that it will eventually default on its debt.

Senior euro zone officials worry that progress toward a second Greek bailout, which would also total around 110 billion euros and aim to fund the country into late 2014, is not being made quickly enough and that the delay is poisoning investors’ confidence in weak economies around the region.

“We need to move on this in the next couple of weeks. It’s not a case of waiting until late August or early September as Germany is saying. That’s too late and markets will make us pay for it,” a top euro zone official told Reuters on Saturday.

German officials insist they too want to put together the second Greek bailout as quickly as possible, but the private sector’s contribution is proving to be a major sticking point.

Germany, the Netherlands, Austria and Finland are determined that banks, insurers and other private holders of Greek government bonds should bear some of the costs of helping Athens. But more than two weeks of negotiations with bankers represented by the Institute of International Finance (IIF), a lobby group, have made next to no progress on agreeing a formula acceptable to all sides.

Initially talks focused on a complex French plan for private creditors to roll over up to 30 billion euros of Greek debt, buying new bonds as their existing ones matured. Around half of proceeds from Greek bonds maturing before the end of 2014 would be rolled over into very long-term debt while 20 percent would be put into a “guarantee fund” of AAA-rated securities.

But as that plan has floundered, Berlin has revived a proposal to swap Greek bonds for longer-dated debt that would extend maturities by seven years. Proposals to buy back Greek bonds and retire them have also been floated.

In a buy-back, the euro zone’s bailout fund, the European Financial Stability Facility, might buy Greek bonds from the market, or the EFSF might lend Greece money to buy bonds. However, these schemes would require further changes to the EFSF’s rules and would therefore have to go through national parliaments, an official source said.

SQUARE ONE

A senior euro zone official told Reuters on Friday that rather than progress being made in the talks with the IIF, as IIF managing director Charles Dallara has said, all sides were close to being “back to square one.”

Dallara will attend the meeting of euro zone finance ministers in Brussels on Monday.

Since the euro zone’s debt crisis erupted last year, the region’s rich governments have aimed to limit it to Greece, Ireland and Portugal, which have so far signed up to bailouts totaling 273 billion euros — a sum that is small compared to the financial resources of the zone as a whole.

Spain, traditionally seen as the next potential domino in the crisis, has managed to retain its access to market funding through fiscal reforms. But because of the large sizes of the Spanish and Italian economies, pressure on the euro zone would increase dramatically if those countries eventually needed financial assistance.

Private analysts have estimated a three-year bailout of Spain, based on its projected gross issuance of medium- and long-term debt in 2011, might cost some 300 billion euros — excluding any additional money for cleaning up Spain’s banks. A three-year rescue of Italy could cost twice that.

German newspaper Die Welt quoted an unnamed ECB source as saying on Sunday that the EFSF, which has a nominal size of 440 billion euros, was not large enough to protect Italy because it had not been designed to do that.

In Italy on Sunday, politicians and government officials scrambled to present a united front and defend Tremonti. Umberto Bossi, the powerful leader of Berlusconi’s Northern League coalition allies, praised Tremonti for “listening to the markets.”

“From tomorrow, we have the job of showing we are united and blocking the effort of speculators,” said Paolo Bonaiuti, a government undersecretary and senior aide to Berlusconi.

“In the coming months we have 120-130 billion euros of bond issues to deal with, so we need cohesion and united intent; it’ll take effort to show that the markets are overdoing it.”

However, Berlusconi himself was silent over the weekend and canceled two appointments to speak, and it was not clear how long the appearance of consensus in the government over austerity plans would last.

One factor behind bond markets’ growing instability is a sense that the euro zone’s basic strategy for dealing with debt problems — keeping countries afloat with emergency loans in the hope they can grow their way out of their debts within a few years — is flawed. More radical action to cut the countries’ debts or boost economic growth may be needed.

In Germany on Sunday, President Christian Wulff said Greece would need a lot longer to resolve its debt problems than many people in Europe were now acknowledging.

Wulff, a former leader in Chancellor Angela Merkel’s conservative Christian Democrats and now Germany’s ceremonial head of state, told ZDF television there was a need for “an overall concept” for resolving Europe’s debt crisis.

“It can’t be something that will suffice for a three-month period but rather has to offer solutions to the problem that will cover the next 10 to 15 years,” Wulff said.

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