Monti vs Rajoy
While Sandy is causing problems in the US, Europe has its own little Sandy. Rajoy and Monti are meeting in Madrid today. This could prove interesting , as these gentlemen are not the best of friends. From Bloomberg.
Italian Prime Minister Mario Monti and Spanish counterpart Mariano Rajoy may try to mask a growing divide over Europe’s new bailout strategy when they meet in Madrid today.
While both have jointly argued against extra budget austerity as the price for help from theEuropean Central Bank, their interests diverge when it comes to whether they should ask for assistance together. A go-it-alone strategy by Spain would probably cut Italy’s borrowing costs while leaving Rajoy to weather the political flak of seeking emergency funds.
“Rajoy was probably pressed by Monti in August to accept a pre-emptive” bailout, said Gilles Moec, co-chief European economist at Deutsche Bank AG in London. “It would have made things so much smoother in Europe and for Italy as well. Rajoy is very much following his own route now.”
European officials are waiting for Spain to trigger a bailout plan unveiled by ECB PresidentMario Draghi last month and designed to draw a line under the region’s debt crisis. While Draghi’s plan to buy potentially unlimited quantities of government debt has soothed markets for now, a botched Spanish rescue could still trigger further turmoil.
Merkel – Same same but different?
Merkel, the Iron lady has been showing more softness over the past weeks. Has the Eurozone crisis made her mor humble, or is this just another political trick? Spiegel reports,
On the outside, the new Angela Merkel looks like the old one. She still wears her usual blazer — a camel-colored one on this particular Wednesday. Her striking amber necklace has resurfaced. Her hair? Always the same. Still, something has changed since the German chancellor returned from her summer vacation. And it was apparent on Wednesday, as she stood together with Italian Prime Minister Mario Monti on the first floor of the Chancellery in Berlin.
Europe is saved?
With markets ripping, and short gamma players chasing the market higher, below is a quick presentation of what happened.
It seems both the Eurocup finalist countries are enjoying the momentum, Spain +4% and Italy 3.3%.
Video below.
Italy interesting despite Silvio’s departure
Who said Italy has become boring with Monti? From Mail Online.
A convicted Mafia mobster has been freed early from his 15 year jail term because he is allergic to the vegetables on the prison menu.
Millionaire Michele Aiello, 56, told the judge at a special appeal hearing he was intolerant to beans, peas, spinach and all other types of greens offered to inmates serving time behind bars.
Lawyers acting for the businessman provided medical certificates as evidence in their argument for Aiello to be released after serving little more than a year of his original sentence.
He was arrested in Palermo on the Italian island of Sicily in 2010 and charged with being the financial brains behind a Mafia money laundering operation. (full article here).
MENA Region “reviving”
Great news out of Italy on Sunday evening. They will tax boats longer than 10 m. While majority still focus on stupidity out of Europe, the tensions in the Middle East are escalating.
IEAE has come out with reports claiming Iran is on the path of developing nuclear weapons. While the US and its allies have already pushed for new harsh sanctions against Iran, China, Russia and Turkey are urging for cautiousness. Israel is also shouting out loud. and could set off a nasty situation developing in the Middle East. Is a new power shift developing in the region? Must see video below;
Staring into the Abyss (as the squeeze kills new smart shorts)
With majority of investors chasing the tail, markets are showing huge volatility. Last week we saw many new “smart” shorts entering the doomsday scenario trade. After the market put in the worst Thanks giving week since 1932, many were thrown into shorting everything. The same guys are now chasing shorts desperately. With HFT dominating, and front running every order, big shorts are finding themselves in a rather desperate situation. The Stoxx 50 is up +4%, so some of the new shorts are losing a whole years performance in a day. With liquidity at poor levels, many risk getting the Santa Rally completely wrong. This is from our Friday evening post;
Yes, it was an interesting session today, but the move up earlier today was probably telling us to cover the shorts. Despite our bearishness, we believe the market is reaching levels where the reward of shorting further is limited.
Although the squeeze is on, the Eurozone problems are still there. We are seeing the credit and equity markets dislocate today, so don’t get too carried away. Spiegel reports on the Continent staring into the Abyss;
Nothing works in Europe without Merkel. And the German chancellor isn’t just opposed to euro bonds. She also refuses to accept a move by the European Central Bank (ECB), backed by the French in particular, to buy up the bonds of ailing euro-zone countries on a much larger scale than it has done to date, in order to bring down the yields on those bonds. But that was not an official topic in Strasbourg, where Sarkozy assured his fellow leaders that France respected the independence of the ECB.
“Grunderkrach” in Germany while Monti is feeling the pressure
As contagion is spreading throughout Europe, the unthinkable might just happen. How solid is Germany actually? From the Telegraph;
The past week has seen investors shun an auction of German government bonds, or bunds, while the country’s cost of borrowing has risen and at various points during the past few days has surpassed that of the UK. Underlying all this is the rapidly crumbling assumption in the markets that Germany is willing, and more importantly able, to underwrite the euro.
Once the credit rating agencies catch on to the market’s nervousness, then a downgrade, or threat of one, becomes more likely. It has happened to the US and France is being threatened too. There is no hiding place from the bond vigilantes, not even in Berlin, as this past week has shown.
Received wisdom is that the German fiscal position is unassailable. It’s true the annual budget deficit there is just 4.3pc of GDP but total debt will rise to 83.2pc of GDP this year, not far off Portugal at 93.3pc and already ahead of France (82.3pc) and Spain (61pc). The German economy, and its management, is seen as being too strong to allow its debt position to get out of hand. But on Tuesday the Bundesbank reminded us that such assumptions are prey to unforeseen events – notably the central bank’s decision to downgrade its forecast for German growth next year to just 0.5pc. (Full article here).
And some reading on Monti’s problems…
We have a new President. Mario Monti.
- MARIO MONTI THANKS NAPOLITANO FOR OFFER TO FORM GOVERNMENT
- MARIO MONTI SAYS ITALY MUST BE PROTAGONIST IN EUROPE
- MARIO MONTI SAYS HE’LL ACT TO SAVE ITALY FROM CRISIS
From Wikipedia; Mario Monti holds a degree in economics and management from Bocconi University, Milan. He completed graduate studies at Yale University,where he studied under James Tobin, the Nobel prize-winning economist.
He taught economics at the University of Turin (1970-85) before moving to the Bocconi University, of which he has been rector (1989-1994) and then president (since 1994). His research has helped to create the Klein-Monti model, aimed at describing the behaviour of banks operating under monopoly circumstances.
Monti is the first chairman of Bruegel, a European think tank founded in 2005, and he is European Chairman of the Trilateral Commission, a think tank founded in 1973 by David Rockefeller.He is also a leading member of the Bilderberg Group.
Monti is an international adviser to Goldman Sachs and The Coca-Cola Company.
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