http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100011256/how-to-ruin-italy/
German M3 is growing at 8pc, but surely the ECB is not going to set policy for German needs and blow up the European financial system in the process? Or is it?
Italy is the victim of an entirely inappropriate monetary policy.
The country needs ultra-loose money to offset €48bn of fiscal tightening and stave off a bond crisis. Instead it gets this, (from the Banca d’Italia):
Italy’s real M1 deposits have been contracting at a rate of 7pc on a six-month annualised basis, and M3 is not far behind. This is catastrophic.
The ECB could prevent such a downward spiral. It chooses not to do so, and is therefore pushing Italy ever closer to the brink. (Yields have fallen slightly today on the relief rally from the US debt deal, but 10-years are still unsustainably high at 5.71pc).
This ECB policy risks a global systemic crisis. Italy has a public debt of €1.84 trillion, the world’s third largest after the US and Japan.
Fairly or not, Italy and Spain are chained together in this storm so the problem is in reality even bigger. The pair must be treated a single unit in systemic financial terms.
No comments:
Post a Comment