Who saved Italy? This column argues that the crisis began with Silvio Berlusconi and ended with Mario Monti. Evidence suggests that restoring a sense of credibility to Italian policymaking was difficult to earn but may be very easy to lose (as the recent run on Italian debt suggests). New and old Italian politicians cannot afford […]
The price of credit-default swaps can be used to estimate the probability of sovereign default. This column examines the case of Italy, looking at how default risk varies across maturities and how this has evolved since January 2011. It suggests that markets are pricing in a heightening of risk two years from now – mostly […]
Ever since the collapse of Lehman Brothers, contagion has become the stuff of policymakers’ nightmares. In recent weeks, with the very real prospect of default by European countries, the sleepless nights are returning. This column provides evidence that markets are bundling all European countries together. They believe that if Italy defaults, it would mean the […]
The Eurozone crisis now extends to Italy. Markets’ pricing of credit default swaps shows that Italy’s troubles are home-baked and that matters are rapidly coming to a head. The risk of default has now become concentrated on the very short run. This suggests that Eurozone leaders may be rapidly punished by markets if they fail […]
Most analysts agree that Greece is insolvent. This column argues that the issue is whether Greece’s troubles are contagious. What to do about Greece? So far, much of the debate has split into two camps: bail-in-ers, the advocates of coercive (but soft) restructuring of Greek debt, and bail-out-ers, those who favour the procrastination of […]
Here we go again with talks of the end of the Euro. This time, however, the row was stirred by President of the European Council in person, Mr. Van Rumpuy. The reason for this alarm is well known. As soon as it became evident that Greece would miss, albeit slightly, the deficit reduction targets agreed with the IMF and the UE, the nightmares of Ireland and Portugal default immediately materialized. the European Union, together with the European Central Bank and International Monetary Fund are now keen to draw a recalcitrant Ireland into accepting a life-jacket package (with strings) of 80-90 billion Euro, that would stop, in the EU mind, the disease from spreading to other vulnerable countries. Clearly, the ultimate crack would be Italy’s default.
Across Europe, coalition governments are taking a battering. In April, the Belgian coalition government collapsed after only five months. In the UK, just four months after forming its first coalition government in over 30 years, the ruling parties enter their annual conferences already on the defensive. In the Netherlands, three months after elections, the country is still waiting for a new government as coalition talks have stalled. Many commentators will emphasise the need for “stable government”; here we examine Italy’s coalition government to identify whether that cliche is true.