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Italy’s Gold enters the Political Fray. But who really owns it?

Italy’s Gold enters the Political Fray. But who really owns it?

Italy’s unpredictable political situation continues to throw up surprises with a controversial claim in national newspaper La Stampa this week that the country’s coalition government wants to sell part of Italy’s gold reserves to cover spending plans and to prevent the need to increase VAT in a forthcoming Italian budget.

While the claims by La Stampa are not really based on anything new, they still managed to cause an international media frenzy as they came a few days after Italy’s governing coalition launched verbal attacks on Italy’s central bankers and financial regulators.

Note that Italy claims to be the world’s third largest sovereign gold holder behind the US and Germany, with claimed monetary gold holdings of 2451.8 tonnes. Interestingly, unlike most countries where sovereign gold is owned by the State but managed by the country’s central bank, the Italian gold is officially owned by Italy’s central bank, Banca d’Italia (Bank of Italy), and not owned by the Italian State.

The Banca d’Italia furthermore claims that 1199.4 tonnes of the gold (or roughly half), is stored in the Bank’s gold vaults under it’s Palazzo Koch headquarters building in Rome, with most of the other half stored in the vaults of the Federal Reserve Bank of New York (FRBNY), and a small balance kept the Bank of England in London, and in an account of the Bank for International Settlements (BIS) in the vaults of the Swiss National Bank (SNB) in Berne, Switzerland. But without any documentary evidence or independent auditing or verification of any of its gold, especially the foreign held gold, these claims are impossible to verify.

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Salvini Proposes Seizing Control Of Italy’s Gold Reserves From The Central Bank

Salvini Proposes Seizing Control Of Italy’s Gold Reserves From The Central Bank

Italy’s populist de facto leader Matteo Salvini seems set on shaking Europe’s financial establishment to the core.

One day after the Italian deputy prime minister and leader of the League party, called for the elimination of Italy’s central bank and the country’s financial regulator, Consob, saying the two institutions should be “reduced to zero, more than changing one or two people, reduced to zero”, or in other words eliminated, and that “fraudsters” who inflicted losses on Italian savers should “end up in prison for a long time”, Salvini prompted fresh shocked gasps in Brussels and Frankfurt when he raised the possibility of seizing Italy’s massive gold reserves away from the country’s central bank.

“The gold is the property of the Italian people, not of anyone else,” Salvini said in comments to reporters on Monday, according to the FT.

The controversial comments, which were seen as threatening the “independence” of the Italian central bank, whose one-time head was none other than Mario Draghi, prompted Giovanni Tria, Italy’s economy minister, to defend the independence of the central bank.

Earlier in the day, Italy’s populists called on lawmakers to pass legislation stating that its gold holdings belong to the state, Bloomberg reported.

The gold ownership bill presented by euroskeptic lawmaker Claudio Borghi of the League adds to an already tense relationship between the Bank of Italy and the coalition government. It’s also sparked criticism from opposition politicians, and some national media argue that it may allow the government to raid the gold reserves to fund spending promises.

Borghi has rejected the accusation and said he’ll ensure Parliament has ultimate power. His concern is that ambiguity of ownership means that a victorious legal action against the central bank — for inadequate supervision, for example — leaves open the possibility of a claimant getting compensation in gold.

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

France Recalls Ambassador From Italy After “Unprecedented” Verbal Attacks

France Recalls Ambassador From Italy After “Unprecedented” Verbal Attacks

The diplomatic row between France and Italy is escalating. More than half a year after Italy summoned the French ambassador over Europe’s migrant row, on Thursday France one-upped Italy when it announced it would recall its ambassador to Italy, citing “outrageous” verbal attacks, repeated “meddling” in its domestic affairs and “unacceptable” provocations.

La France rappelle son ambassadeur en Italie “après des attaques” “sans précédent” (Quai d’Orsay) #AFP

The French foreign ministry said the decision was taken following a meeting between Italy’s deputy prime minister Luigi Di Maio and leaders of the French Yellow Vest protester movement, trumpeting his support for the grassroots protests in defiance of President Emmanuel Macron.

“This is unprecedented since the war,” the foreign ministry said in an emailed statement on Thursday. “Having disagreements is one thing, but using the relationship for electoral purposes is quite another.”

Luigi di Maio, Italy’s Deputy Prime Minister and leader of the anti-establishment 5-Star Movement hailed the “winds of change across the Alps” yesterday on Twitter after meeting with Yellow Vest activists Cristophe Chalencon and Ingrid Levavasseur.

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

How An Italian Debt Crisis Could Take Down The EU

How An Italian Debt Crisis Could Take Down The EU

Plagued by another run of bank bailouts and simmering tensions between the partners in its ruling coalition, Italy’s brief reprieve following the detente between its populist rulers and angry bureaucrats in Brussels is already beginning to fade. As Bloomberg reminded us on Monday, Italy’s $1.7 trillion pile of public debt – the third largest sovereign debt pool in Europe – is threatening to set off a chain reaction that could hammer banks from Rome, to Madrid, to Frankfurt – and beyond.

Italy

Just the mention of the precarity of Italian debt markets “can induce a shudder of financial fear like no other” in bureaucrats and businessmen alike – particularly after Italy’s economy slid into a recession during Q4.

Italy

While much of Italy’s debt burden is held by its banks and private citizens, lenders outside of Italy are holding some 425 billion euros ($486 billion) in public and private debt.

Bank

The Bloomberg analysis of Italy’s financial foibles follows more reports that Italy’s ruling coalition between the anti-immigrant, pro-business League and the vaguely left-wing populist Five-Star Movement has become increasingly strained. Per BBG, the two parties are fighting a battle on two fronts over the construction of a high speed Alpine rail and a legal case involving League leader Matteo Salvini over his refusal to let the Dicotti migrant ship to dock in an Italian port last summer.

After M5S intimated that it could support the investigation, the League warned that such a move would be tantamount to “blackmail” against Salvini, whose lieutenants have been pushing for him to take advantage of the party’s rising poll numbers and push for early elections later this year. However, Salvini has rebuffed these demands, warning that there’s nothing stopping Italian President Sergio Mattarella from calling for a new coalition instead of new elections.

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

Italy Building Anti-EU Axis

Europe Likely in Recession Now: Germany, France, Italy Production Collapsed

German, French, and Italian industrial production collapsed in November. Italy GDP is negative for 3rd Quarter.

Italy GDP

Italy’s GDP was negative for the third quarter. Gross domestic product (GDP) in the euro zone’s third largest economy fell by 0.1 percent in July-September due to weaker domestic demand, statistics bureau ISTAT said, the first decline since the second quarter of 2014.

Based on industrial production, Germany and France will soon follow.

Germany Industrial Production

Analysts actually expected German IP to rise. Go figure.

German industrial output fell unexpectedly by 1.9 percent month-on-month in November 2018, missing market expectations of a 0.3 percent rise and following an upwardly revised 0.8 percent drop in October.

France Industrial Production

France’s industrial production fell 1.3 percent from a month earlier in November 2018, reversing an upwardly revised 1.3 percent growth in October and missing market expectations of a 0.2 percent gain.

Italy Industrial Production

Italy’s industrial production slumped 1.6 percent from a month earlier in November 2018, much worse than market expectations of a 0.3 percent decline and following a meager 0.1 percent gain in October.

Brink of Recession or Already In Recession?

The water levels of the Rhine are low and Germany may be flirting with recession. The two are connected, many argue. The Rhine is a key artery for the transport of many goods into and through the country, particularly for the chemicals and energy industries.

But praying that the water rises and all will come good might not be enough. Just as the idea that negative growth in the third quarter was due to the temporary hit of emissions testing rules on an already troubled car industry, the one-off excuses are starting to wear a bit thin. There is a grander slowdown facing Berlin, and, as the eurozone’s economic powerhouse, potentially the rest of its members too.

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

Italy’s New Government Eats Its Words, Joins Bank Bailout Club

Italy’s New Government Eats Its Words, Joins Bank Bailout Club

Well, that didn’t take long. And whatever happened to the Eurozone’s new bail-in rule?

Italy’s government, in its eighth month in power, has already bailed out a bankrupt bank, mid-sized Banca Carige, with public funds. If approved by European Commission and the ECB, it will be the fourth Italian bank rescue in just over two years. As Italian daily Il Sole 24 Ore points out, Italy’s populist government has adopted virtually the exact same playbook to save Carige that was used by its predecessor in the previous three resolutions:

The draft of the new Carige decree is a carbon copy of the one used by the Gentiloni Government for the bailouts of Monte dei Paschi di Siena (MPS), BPVI and Veneto Banca — identical in every detail from the rules on state guarantees to the mechanisms adopted…

It took just eight minutes for Italy’s coalition partners, Five Star and the League, to renege on their flagship promise never to bailout a bank, reports Bloomberg. The new decree will allow the government to guarantee Carige bonds up to a maximum value of €3 billion, making it easier for the lender to retain access to the funding market. The government also wants the option, if necessary, to recapitalize the bank by injecting as much as €1 billion into its coffers despite having lambasted the previous government for doing the exact same thing with MPS.

It’s not yet clear whether the proposed rescue of Carige will contravene EU state-aid rules, which are supposed to impose strict conditions on the “precautionary recapitalization” envisaged by the government. Carige is already under the administration of ECB-appointed administrators after failing to agree to a €400 million capital increase at the end of last year. So if there are any issues it should be easy for European Commission or the ECB to stop the bailout dead in its tracks.

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

ECB Takes “Unprecedented” Step Of Putting Italy’s Banca Carige In Administration

Investors who had hoped that the resolution of Italy’s budget showdown with the EU would mark an end to a volatile period for Italian bonds and stocks were disappointed Wednesday when fears about an Italian banking crisis reemerged after the ECB appointed a slate of temporary administrators to oversee troubled Italian lender Banca Carige after nearly its entire board resigned.

Earlier on Wednesday, Consob, Italy’s market watchdog, said it had suspended trading in shares of Banca Carige for the session following a request by the bank, according to Reuters.

European bank stocks dropped while bonds rallied as fears about softer-than-expected factory orders across the Continent were compounded by the developments in Italy (which proved an exception to the trend of weak PMIs).

Banca

Fabio Innocenzi, Pietro Modiano and Raffaele Lener have been appointed as temporary administrators while Gianluca Brancadoro, Andrea Guaccero and Alessandro Zanotti have appointed as members of the surveillance committee.

The “unprecedented” move – as Bloomberg called it – follows a failed attempt to raise some 400 million euros last month after the Malacalza family, the billionaire shareholders who control nearly one-third of Carige, abstained from a vote on a turnaround plan, which sought to fill the capital hole left by the fraud scandal.

Carige

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The European Project Comes to an End

The European Project Comes to an End

The end of the EU and the Balkans as China’s foothold in Europe

Though the end of the European Union is inevitable, the proponents of a further integrated or federal superstate are busy making a last effort to achieve their goal. The opposition against the project is mounting with every day. Europe is suffering from economic stagnation, and is facing a demographic calamity.

The pro-European establishment’s last hope was the newly-elected French President Emanuel Macron who was to revive the economy and integrate the European Union under French leadership. Gefira was of the opinion that all these expectations were misplaced. The once great nation is broken beyond repair. France’s problems are much worse than those of Italy. Though Italy has a higher debt-to-GDP ratio than France, France has a larger budget deficit, and the difference is that while Italy has a trade surplus France has a trade deficit, so the country cannot pay for its imports.

Gefira Financial Bullletin #29 is available now

  • European Project Comes to an End.
  • The Balkans
  • Intelligent or automated security is the future

While the Italian “populist” Mateo Salvini is earning the nation’s respect, Emmanuel Macron’s popularity is at a historic low. All of France is engulfed by riots, civil unrest and looting. In city after city, village after village, protesters have been clashing with the police for weeks now while President Macron has nothing to offer to appease them, unless he violates the budget deficit boundary of 3%.

Like the Soviet Union once was, France is a sizeable social-multicultural experiment, and like the empty shops in communist countries, the demographic changes in France are visible in every section of the society, but nobody dares to name them. 

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

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.

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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

Italy

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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