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Macron Heralds The End Of The Union

Paul Almasy Paris 1950

The concept of the EU might have worked, but still only might have, if a neverending economic boom could have been manufactured to guide it on its way. But there was never going to be such a boom. Or perhaps if the spoils that were available in boom times and bust had been spread out among nations rich and poor and citizens rich and poor a little more equally, that concept might still have carried the days.

Then again, its demise was obvious from well before the Union was ever signed into existence, in the philosophies, deliberations and meetings that paved its way in the era after a second world war in two score years fought largely on the European continent.

In hindsight, it is hard to comprehend how it’s possible that those who met and deliberated to found the Union, in and of itself a beneficial task at least on the surface in the wake of the blood of so many millions shed, were not wiser, smarter, less greedy, less driven by sociopath design and methods. It was never the goal that missed its own target or went awry, it was the execution.

Still, no matter how much we may dream, how much some of the well-meaning ‘founding fathers’ of the Union may have dreamt, without that everlasting economic boom it never stood a chance. The Union was only ever going to be tolerated, accepted, embraced by its citizens if they could feel and see tangible benefits in their daily lives of surrendering parts of their own decision making powers, and the sovereignty of their nations.

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Italy, the EU, and the Fall of the Roman Empire

Italy, the EU, and the Fall of the Roman Empire

Italy, the EU, and the Fall of the Roman Empire

The EU leadership is trying to contain a crisis that is emerging at increasing speed: this challenge comprises the rise of contumacious states (i.e. the UK, Poland, Hungary and Italy), or of defiant, historic ‘cultural blocs’ (i.e. Catalonia) – all of whom are explicitly disenchanted with the notion of some coerced convergence towards a uniform EU-administered ‘order’, with its austere monetary ‘disciplines’. They even dismiss the EU’s claim to be, somehow, a part of a greater civilizational order of moral values.

If, in the post-war era, the EU represented an attempt to escape the Anglo-American hegemony, these new defiant blocks of ‘cultural resurgence’ which seek to situate themselves as interdependent, sovereign ‘spaces’ are, in their turn, an attempt to escape another type of hegemony: that of an EU administrative ‘uniformity’.

To exit this particular European order (which it originally was hoped, would differ from the Anglo-Americanimperii), the EU nevertheless was forced to lean on the latter’s archetypal construct of ‘liberty’ as empire’s justification (now metamorphosed into the EU’s ‘four freedoms’) on which the EU strict ‘uniformities’ (the ‘level-playing-field’, regulation in all aspects of life, tax and economic harmonization) have been hung. The European ‘project’ has become seen, as it were, as something that hollows out distinct and ancient ‘ways-of-being’.

Indeed, the very fact of their being attempted, at different levels, and in distinct geographical cultural regions, these assays indicate that that EU hegemony has already weakened to the point that it may not be able fully to hinder the emergence of this new wave. What is at stake precisely for the EU, is whether it can succeed to slow down, and curb in every way, the emergence of this process of cultural re-sovereigntisation, which of course, threatens to fragment the EU’s vaunted ‘solidarity’, and to fragment its matrix of a perfectly regulated customs union and common trade area.

…click on the above link to read the rest of the article…

There Is Suddenly A Far Bigger European Problem Than Brexit Or Italy

Forget Brexit and Italian populists for a second. It’s worth paying attention to what’s going on in France.

For more than two weeks, the country has been disrupted by an unusual protest: the so-called “Gilets Jaunes” or “Yellow Vests.” France is used to labor unrest and chaos affecting transport of course, with strikes something of a national pastime.

But this time it’s different.

Some 100,000 people blocking toll roads, petrol stations and crossroads is creating major disruption to transport and retail. It’s also proving to be extremely tricky to defuse, as there’s no single protest leader to negotiate with.

For investors, the question is whether it could derail the outperformance of French equities in 2018. One thing is clear. These protests are a real threat to the country’s retailers, including Carrefour and Casino, which are already busy battling a price war and trying to fend off Amazon.com’s efforts to penetrate their home market. Big-box retailers have been hurt by the demos and blockages throughout the country, with customers denied access to some hypermarkets and supermarkets for entire days at a time. They recorded an average fall in consumer-good sales of 35 percent on Nov. 17 and of 18 percent the following Saturday, according to Nielsen data.

All this is adding to the perception of shrinking purchasing power in France, in particular among people on lower incomes. And that “doesn’t bode well” for the year-end holiday retail season, which needs a boost after the unseasonably hot weather of the previous months, according to Invest Securities. In fact, consumer confidence has been depressed since the summer, and this might be the final straw.

…click on the above link to read the rest of the article…

Salvini Takes Control of Europe’s Future

Salvini Takes Control of Europe’s Future

Deputy Prime Minister Matteo Salvini just declared himself the leader of the Europe’s future.  He refuses to budge one inch in negotiations with the European Union over Italy’s budget now threatening to take down the government.

And in doing this he not only speaks for Italians, he is now speaking for that growing part of the European population who sees what the EU is morphing into and recoiling in horror.

Protests in France over Emmanuel Macron’s new tax on diesel have turned violent.  The British leadership has completely betrayed the people over Brexit.  They may win this battle but the animosity towards the Britain’s leadership will only grow more virulent over time.

As the core leadership in France and Germany fades in popularity, held in place because of domestic political squabbling, Angela Merkel and Macron are ratcheting up the rhetoric against the rising nationalism Salvini represents and are now pushing hard for their Federation of Europe before both of them leave the scene in the next few years, at best.

If they lose their battles with Salvini and Hungary’s Viktor Orban they may be run out of office with pitchforks and firebrands.

Bernard Connelly, author of the brilliant expose The Rotten Heart of Europe (which should be required reading) asks the salient question about Brexit no one associated with Project Fear can confront.

If separation from the EU is so complicated, why was no one talking about blockades and economic catastrophe before the Scottish Independence referendum in 2014?

The answer is simple. No one in power expected the referendum to pass and when it didn’t the issue ended.

…click on the above link to read the rest of the article…

Salvini Threatens To Collapse Italy’s Government If Deficit Target Is Changed

Italy’s Deputy Prime Minister Matteo Salvini escalated the ongoing standoff between the EU and Italy, saying he would bring down the government if the coalition’s budget deficit target was changed.

The remarks by Salvini, Italy’s de facto leader who has been enjoying a steady climb in public opinion polls as he has continued his hardline negotiating approach with the European establishment, were quoted by newspaper La Repubblica hours before the country’s prime minister, Giuseppe Conte, was scheduled to make an attempt in Brussels to convince the European Commission that the country’s budget is sound. That, as is widely known by now, include the 2.4% deficit goal for 2019 that has become a lightning rod for Commission objections.

“The 2.4 percent deficit target can’t be touched, otherwise I will bring down the government,” Repubblica quoted Salvini as saying in a telephone call to Conte. The report said Salvini was willing to make only minor concessions in next year’s spending plan.

For Savlini the threat of new elections poses little downside risk: according to a recent poll, most Italians view Salvini, the outspoken leader of the anti-immigrant League party, as the real head of government, with just one in six casting Prime Minister Giuseppe Conte in that role. The monthly survey in La Repubblica newspaper showed 58% considered Salvini the leader, while 16 percent picked Conte and 14 percent chose Luigi Di Maio, who heads the anti-establishment 5-Star Movement and is the co-head of the coalition government. Salvini and Di Maio are deputy prime ministers in Conte’s coalition government, which took office in June and which the Demos poll found that 58 percent of respondents support.

…click on the above link to read the rest of the article…

The Big Bet Against Italian Banks

The Big Bet Against Italian Banks


The eurozone’s third-largest economy, Italy, is marooned in a deep political and economic crisis, with seeming endless problems: an economy that has barely grown in decades, sky-high unemployment rates, ballooning national debt, an inability to form a stable coalition government and, lately, a looming showdown with the EU over mounting debt.

These have precipitated a wave of populism that has rejected the old establishment and brought in a new guard.

Unfortunately, that has done little to resolve another Italian bugaboo: a massive banking crisis.

European banks have accumulated about $1.2 trillion in bad and non-performing loans (NPLs) that have continued weighing down heavily on their balance sheets. Italian banks are sitting on the biggest pile of bad debt: €224.2B ($255.9B), with NPLs and advances making up nearly a quarter of all loans.

As if that is not bad enough, the banks now have to contend with potentially heavy penalties coming from Brussels after Italy’s recalcitrant leadership refused to revise the country’s fiscal 2019 budget to lower debt and borrowing.

The sharks can already smell the blood in the water, and investors have been shorting Italian banking stocks to death. Italian banks hold nearly a fifth of the country’s government bonds.

(Click to enlarge)

Source: Bloomberg

(Click to enlarge)

Source: Reuters

Short sellers have mainly been targeting medium-sized lenders as well as asset manager Banca Mediolanum and investment bank Mediobanca. According to FIS Astec Analytics data, the volume of these banks’ shares on loan—a good proxy for short interest—has shot to its highest in 15 months.

Short interest on Mediolanum’s shares now stands at 8.7 percent of outstanding shares, while Mediobanca has 15 percent of its shares sold short.

Rome Refuses To Back Down

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QE Created Dangerous Financial Dependence, Italy Hooked, Withdrawal Next, ECB Warns

QE Created Dangerous Financial Dependence, Italy Hooked, Withdrawal Next, ECB Warns

“Who will purchase the €275 billion of government debt Italy is to issue in 2019?”

The ECB, through its army of official mouthpieces, has begun warning of the potentially calamitous consequences for Italian bonds when its QE program comes to an end, which is scheduled to happen at the end of this year.

During a speech in Vienna on Tuesday, Governing Council member Ewald Nowotny pointed out that Italy’s central bank, under the ECB’s guidance, is the biggest buyer of Italian government debt. The Bank of Italy, on behalf of the ECB, has bought up more than €360 billion of multiyear treasury bonds (BTPs) since the QE program was first launched in March 2015.

In fact, the ECB is now virtually the only significant net buyer of Italian bonds left standing. This raises a key question, Nowotny said: With the ECB scheduled to exit the bond market in roughly six weeks time, “who will purchase the roughly €275 billion of government securities Italy is forecast to issue in 2019?”

With foreigners shedding a net €69 billion of Italian government bonds since May, when the right-wing League and anti-establishment 5-Star Movement took the reins of government, and Italian banks in no financial position to expand their already bloated holdings, it is indeed an important question (and one we’ve been asking for well over a year).

According to former Irish central bank governor and ex-member of the ECB’s Governing Council Patrick Honohan, speaking at an event in London, when the ECB’s support is removed, “the yield on Italian government bonds will be much more vulnerable.”

…click on the above link to read the rest of the article…

Take Heed Italy, Brussels Doesn’t Care One Whit About You

Take Heed Italy, Brussels Doesn’t Care One Whit About You

Take Heed Italy, Brussels Doesn’t Care One Whit About You

Watching the complete betrayal of Brexit by British Prime Minister Theresa “The Gypsum Lady” May is proving to be a wake up call for Italians. The latest polling results coming out of Italy show that while the populist coalition in Italy is unpopular in Brussels it is still very popular with Italians.

And that’s a good thing because when you look closely at Brexit negotiations it is clear that all that matters is the EU retaining power over the U.K. and not what is in the best interest of anyone involved, British or otherwise.

The Italian coalition partners still command nearly 60% of all Italians’ support, only their preference has changed. Lega now outpolls Five Star Movement (M5S) 33% to 26%, while the other center-right parties, namely Silvio “Stalking Horse” Berlusconi’s Forza Italia have collapsed (from 14% at March’s elections to just 7% now).

And roughly that same number now see the EU as mistreating Italy. These numbers will only get worse if the EU goes through with levying fines against Italy for submitting a budget Brussels doesn’t like.

Moreover, now we’re seeing support for Italeave rise as well. A recent poll by Politico Magazine posted over at Zerohedge shows a slight majority of Italians under age 45 are ready to do just that, leave the European Union.

The over 45 crowd is still enamored with the ideal of the EU tying together a warring Europe rather than confront the reality of what it actually is, a distant and tyrannical oligarchy led by unelected technocrats with strong ties to old money and old power.

The source of this support comes from, I think, the stark contrast between May’s appeasement of rankled EU leadership over the British people’s temerity to want out of their wretched union and how Deputy Prime Minister Matteo Salvini is attacking Brussels’ hypocrisy over fiscal restraints.

…click on the above link to read the rest of the article…

Blain: “Who Will Purchase The €275 Billion Of Debt Italy Expects To Issue In 2019?”

Gamma Ray Bursts, El-Erian on market disruption, Tech Stocks and Italy Bonds.

“I’ve always admired Capital Mainwaring.” [I don’t!]

I must stop reading newspapers. They are scary. Why worry about stocks and bonds when we’ve apparently got a pinwheel Nebula spinning at 12mm km/hour, named after the Egyptian God of Chaos (Apep), about to go Nova and its practically right next door – only 8000 light years away! That’s like the desk next to me in galactic terms! If a Gamma Ray Burst from such an event hit we are all literally toast. Global Crash or Supernova? You choose. (https://www.thetimes.co.uk/article/dying-star-could-be-a-time-bomb-rgrw2mvkq)

Rather puts things in perspective….

But, let’s assume a Supernova is not going to happen before I collect my pension.. so back to the day job.

Another bad day in stocks and still it’s the Tech companies that are leading the downside. Oil is taking a spanking, and if there was anything positive to say about the bond markets, bless me, but I can’t find it.

The papers today are full of fear… “buy-the-dip no longer working”, “short-sellers squeezed”, or “Tech Skid Becoming a Full-Blown Crash”. The extraordinarily cold weather in the US, and the threat it raises to the masses going Black Friday shopping, is being touted as yet another nail in the stock-market coffin.

However, relax. It all makes sense. Kind of.

In the FT there is a rather good article by Mo-the-Tash (sorry if anyone is offended by the nickname we’ve given Mohammed El-Arian – but its affectionate!) Let me give you a random sprinkling of phrases from his article “Risks rise for investors as developed economies falter”

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In Unprecedented Clash, EU Rejects Italy’s Budget, Paves Way For Sanctions

Yields on Italian government bonds fell on Wednesday morning as the euro climbed following reports that Italy’s ruling coalition might be open to reviewing its budget plan. Though the Italian government swiftly denied the reports about being open to changes in its plan, the moves in the euro and yields persisted, as analysts said they didn’t appear to be news driven.

The spread between the 10-year BTP and 10-year German bund tightened to tightening as much as 16 basis points to 309 basis points.



Italian bank shares also eased off their highs of the session after the denials, but remained 2% higher on the day after sinking to two-year lows on Tuesday.

And in other signs that the confrontation between Italy and Europe is heading toward a precipice, the European Union confirmed Wednesday morning that it would officially reject Italy’s budget plan, an unprecedented move that will likely lead to billions of euros in fines being levied against Rome for violating the bloc’s budget rules.

The Italian government calls for an expansion of the country’s budget deficit to 2.4% of GDP to finance tax cuts, expanded pension benefits and other handouts to unemployed and desperate Italians.

“Our analysis today suggests that the debt doesn’t respect our budget rules. We conclude that opening a proceeding against excessive spending based n the debt is then justified,” the EU said, according to ANSA.

The Italian plan represents a “particularly grave disrespect” of EU budget rules, particularly the recommendation from the meeting of EU ecofin ministers last July 13. The statement confirms Brussels’ previous analysis.


European Commission Vice President Valdis Dombrovskis said Italy’s aggressive spending would eventually have a negative impact on growth.

…click on the above link to read the rest of the article…

60% Of Italians Think EU Is Bad For Italy

If the European Commission does levy billions of fines against the Italian government (or enforce some other punishment), some “60 million Italians will rise up” against the trade bloc – or at least that’s what a clearly frustrated Deputy Prime Minister Matteo Salvini told a group of Italian reporters following reports that the Commission could move to punish Italy as soon as next week.

The Italian people, Salvini added, would never accept those penalties, according to a report in Italy’s ANSA newswire. And according to the latest polling, there’s more than a little truth to that.

As the 27 EU members who aren’t the UK brace for the inevitable fallout for what increasingly looks to be a bumpy Brexit, one shocking poll revealed that 60% of Italians feel that their country has been mistreated by the European Union. If accurate, that’s several percentage points higher than the percentage of Britons who voted to leave the EU back in 2016.


According to Express, pollsters Coldiretti and Ixè found that some 43% of Italians believe that Brussels’ economic policies were designed by stronger economies with little concern for weaker EU members. And fittingly enough, one of Italians’ biggest concerns about the EU and its unfair treatment of Italy stems from policies related to agriculture.

Two-thirds of Italians believe that the EU’s policies on food damage products made in Italy and only 10 percent believe the Italian agri-food sector is benefitting from EU choices.

A spokesperson for Coldiretti said: “The clear majority of Italians therefore believe that community regulation and the recent choices regarding international treaties are not adequate to guarantee quality, safety but also respect for the gastronomical traditions of Italy.”

But the dissatisfaction runs deeper than food.

…click on the above link to read the rest of the article…

Italy Throws Down the Gauntlet to Challenge the Brussels Establishment

Italy Throws Down the Gauntlet to Challenge the Brussels Establishment

Italy Throws Down the Gauntlet to Challenge the Brussels Establishment

The EU has had a lot of trouble on its hands, as its members, such as Poland and Hungary, are openly challenging the established order. This time it’s a very serious situation, because Brussels is facing defiance from Italy, the 3rd largest national economy in the eurozone and the 8th largest global economy in terms of nominal GDP. It has a population of over 60 million. It is also a Europhile country and the bloc’s founding member.

The Italian government has rejected the EU’s calls to revise its draft budget for 2019 that includes a 2.4% deficit of GDP, which could dangerously boost the nation’s public debt. The ruling coalition in Rome, which is made up of the League and the populist Five Star Movement, has decided to increase borrowing so that it can fund its campaign promises, such as lowering the retirement age and increasing welfare payments.

Last month the European Commission claimed that these spending targets went against EU rules. Rome is burdened by the second-highest amount of public debt in the eurozone. There’s a 131.8% difference between borrowing and economic output there, but the government believes it will achieve substantial economic growth, while the EU’s predictions for Italy are rather gloomy. Nov. 13 was the deadline for submitting a revised draft budget. Rome did not comply. Now the EU leadership is threatening it with sanctions it until it falls into line. Italy could be slapped with a fine of €3.4 billion.

The Italian government takes an independent stance on a multitude of issues. It is seen as Russia-friendly in its calls for lifting, or at least easing, the sanctions against the Russian Federation.

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Beware Fireworks As Italy’s Budget Resubmission Deadline Looms

With stocks in Europe attempting a modest relief rally after yesterday’s sharp selloff, traders remain on edge over political developments as today is the deadline for Italy’s cabinet to resubmit their budget proposal after the EC requested a new fiscal plan. Virtually nobody expects any material changes, especially with Il Sole reporting this morning that Italy will maintain its 2019 deficit target at 2.4% of GDP and could alter the 2019 GDP growth rate of 1.5%

When looking at next steps, Deutsche Bank economists yesterday concluded that as contagion has been relatively limited for now, the commission will continue to adopt a tough stance on Italy, and it now seems inevitable they will recommend an Excessive Deficit Procedure (EDP) in the next few weeks.

And speaking of Deutsche Bank, the German lender’s Head of Research and Chief Economist David Folkerts-Landau penned a hard hitting  Financial Times op-ed on the Italian situation, whose argument is that Europe must cut a grand bargain with Italy and that another costly sovereign debt crisis is inevitable unless the confrontational approach of the EC gives way to greater co-operation. According to Landau, Italy has actually been a frugal member of the single currency with a cumulative primary surplus every year outside of the GFC. However, these surpluses have simply helped finance the interest on the legacy debt and debt/GDP has still climbed. Meanwhile, the associated spending cuts and austerity required to run a primary surplus have lowered the standard of living for the population and led us to the political situation we find ourselves at today. What is his proposal?

The only viable option left is to reduce Italy’s debt service payments. This would create room to increase spending to modernise its economy without increasing the deficit and debt.

…click on the above link to read the rest of the article…

Italian Banks On Verge Of New Crisis After €400 Million Hole Emerges At Banca Carige

Remember the Italian “doom loop”?

Two months ago we reported that during the first Italian bond market freakout this May over the ascent of the populist due of Salvini-Di Maio to the Italian throne, Italian bank holdings of domestic government bonds rose by a record €28.4bn, more than what was seen during the peak of the European sovereign debt crisis of 2012. Visually, this is what the single biggest month of Italian bank purchases of BTPs in history looked like.

This vicious circle of Country X banks (in this case Italy) buying Country X bonds during times of stress – with the ECB’s trusty backstop – had for years been Europe’s dreaded sovereign bank doom loop. And, as Italy clearly demonstrated, repeated and aggressive attempts by European regulators and policymakers to finally break the “doom loop”, most recently with the introduction of the 2014 BRRD directive, which sought to remove the need for and possibility of bank bailouts, and instead ushered in bail ins, had been an abject failure.

On Monday traders got a harsh reminder of this when Italian banks came under renewed market focus, and selling, due to their inflated holdings of the country’s government bonds whose value has tumbled since May – just as they doubled down on their BTP purchases.

This time, the epicenter of the bank rout was Banca Carige, Italy’s last remaining large problem bank; weakened by years of mismanagement and shareholder infighting, it has fallen behind in the restructuring process that has seen rivals shed bad debts in the past two years. And according to Reuters, healthy Italian banks will be needed to help fill a €400 million hole on Banca Carige’s balance sheet “in order to avert a possible crisis that would further destabilize the sector.”

…click on the above link to read the rest of the article…

With Looming Deadline Italy’s Populists Defy EU, Warn Of “Suicide”, “Massacre” For Italy

After the latest GDP data showed that Italy’s economy didn’t grow at all during the third quarter amid a spreading European slump that’s likely inspiring panic in Brussels, the country’s emboldened populist leaders are refusing to surrender in what has become a political game of chicken with the EU over a proposal that calls for an expansion of Italy’s budget deficit to 2.4% to fund pension benefits, welfare programs and tax cuts.

Ahead of a Tuesday deadline to resubmit its budget proposal, which Brussels rejected last month, Italian Prime Minister Giuseppe Conte was said to be holding a last-minute meeting with the two men who are really running Italy, Deputy PM’s Matteo Salvini, of the anti-immigrant La Lega, and Luigi Di Maio, of the anti-establishment Five Star Movement where, according to local media reports, they were expected to – paradoxically – discuss lowering the country’s growth forecast from 1.5% to 1.0-1.2%% in order to get a budget deal (it wasn’t immediately clear how expecting even slower growth would bolster their case).

However, while Salvini reportedly had a “positive” meeting with Conte on the budget, Di Maio reportedly skipped that meeting and, in a series of interviews given Monday and Sunday, the M5S leader appeared to dig in his heels, telling reporters at Montecitorio that giving up on the populist government’s fiscally stimulative agenda would be tantamount to economic “suicide” that would likely bring about a recession, according to Italian newswire ANSA.

“The only way to respect EU parameters is to make a suicidal budget law that would bring on a recession,” newswire Ansa cites Italy Deputy Prime Minister Luigi Di Maio as saying. Di Maio said he was agreeing with comments from Finance Minister Giovanni Tria.

…click on the above link to read the rest of the article…

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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