Is Italy a bigger problem than Greece?
The focus might well be shifting from Greece to Berlusconi’s Italy. The old rascal seems determined to hang on to power and has assured the world that Italy’s finances are in good. Ahem… With Italian 10 year bond yields touching record highs of 6.71% it would be prudent to ignore what he says. If bond yields reach 7% Italy won’t be able to make good on its payments. Italy is the third largest economy in the eurozone and its debt worries are a huge threat to the single currency.
Berlusconi posted on his facebook page “We will carry on, we have to be ready to fight because a new unelected government including the left would be the opposite of democracy”. Coming from a man who has a huge stake in Mediaset (Italian TV) that sounds a bit rich. A Reuter’s survey of ten fund managers last week revealed their belief that if the current government was to fall, the country’s bond prices would recover with yields narrowing by up to one percentage point.
He faces a confidence vote on his budget and Europe waits with bated breath to see how this drama unfolds…
By David Gibson
Gibson Financial Planning – Investment consultancy in Coleraine.