The Great Debate UK

from Breakingviews:

Berlusconi really must go

By Hugo Dixon
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Silvio Berlusconi really must go. It’s no longer about abuse of power and “bunga bunga” sex parties. His continuation as Italy’s prime minister could drive the country into a financial death spiral. His own supporters are shaken and the public is afraid. But the left-wing opposition is behaving responsibly, so there’s some hope.

Italy pulled back from the brink -- slightly -– on July 12. After nudging above 6 percent, the yield on 10-year government bonds fell back to a still uncomfortable 5.6 percent. Part of the explanation is that the opposition agreed to a fast-track parliamentary vote on the government’s new austerity program. The multi-year fiscal squeeze of more than  40 billion euros should therefore be approved by the end of the week.

But this is not enough. Berlusconi is in virtual open warfare with Giulio Tremonti, his finance minister. Even though things have been patched up for now, the idea that this dysfunctional government could serve out its term until 2013 is troubling. Italy could lurch from mini-crisis to mini-crisis – with the borrowing cost on its debt, currently at 120 percent of GDP, ratcheting ever higher. The more Rome is perceived by financial markets to have fallen behind the curve, the bigger the fiscal adjustment will have to be to get it back on track.

Another day, another crisis

By Laurence Copeland. The opinions expressed are his own.

Here we go again – the same sickening feeling, as stock markets reel amid a flight to “safety”. For months, there have been worries about contagion from the Greek imbroglio, and now the nightmare seems to be coming true, as one after another the weak European economies are put to the sword.

First came Greece and Ireland, then Portugal, now it’s the big league – Spain and, even bigger, Italy (and don’t forget Belgium, an accident waiting to happen for many years now, not very important in pure economic terms, but psychologically significant as the home of the whole sorry euro disaster).

Could Italy go the way of Greece?

Italy has hogged the headlines in recent weeks mostly for political reasons rather than financial ones. But in a few months we may be concentrating on its fiscal woes and unsustainable debt burden.

Last week credit rating agency Moody’s announced it was putting Italy on review for a possible downgrade to its Aa2 credit rating. These reviews typically last three months or so, and although a downgrade would still leave Italy at the higher end of investment grade, it is not good news to be sliding down the scale, especially when a sovereign debt crisis is raging further along the Mediterranean coast.

The death of the euro is greatly exaggerated

-Laurence Copeland is a professor of finance at Cardiff University Business School and a co-author of “Verdict on the Crash” published by the Institute of Economic Affairs. The opinions expressed are his own.-

The Governor of the ECB, Jean-Claude Trichet has raised interest rates by 0.25 percentage points – and quite right too. For us in the UK, blaming rising prices on temporary disturbances in the world’s commodity markets is a figleaf to hide the fact that we are actually embarking on a partial default-by-inflation. For Europe, it is a different story. For one thing, the Germany-Austria-Netherlands bloc is, if not booming, at least chugging along at a highly respectable rate, and as the ECB Governor said today in response to a question about the impact of the rate rise on Portugal, his job is to set interest rates for the Eurozone as a whole, not just for the benefit of one of its smallest and weakest members.

from MacroScope:

Should central banks now sell gold?

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Central banks in debt-strapped countries have a golden opportunity ahead of them, if you will excuse the pun, to help their countries' finances by selling their yellow metal holdings.

At least, that is the message that Royal Bank of Scotland's commodities chief Nick Moore has been giving in recent presentations -- and he thinks it might happen.   The gist is that gold is now at a record price but banks have not come close to  meeting their sales allowance for the year.

from Global News Journal:

If Greece’s debt dam breaks, who gets wet?

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The 16 countries that share the euro single currency have agreed they will help Greece out if it needs. So far so good. But only now is the nitty-gritty of how member states will go about paying for their contributions being hammered out. And suddenly things are getting a little complicated.

Italy announced on Tuesday it would have to issue government bonds -- known as BTPs --  to raise funds for its part in any Greek assistance. 

from MacroScope:

Political economy and the euro

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The reality of  'political economy'  is something that irritates many economists -- the "purists", if you like. The political element is impossible to model;  it often flies in the face of  textbook economics;  and democratic decision-making and backroom horse trading can be notoriously difficult to predict and painfully slow.  And political economy is all pervasive in 2010 -- Barack Obama's proposals to rein in the banks is rooted in public outrage; reading China's monetary and currency policies is like Kremlinology; capital curbs being introduced in Brazil and elsewhere aim to prevent market overshoot; and British budgetary policies are becoming the political football ahead of this spring's UK election. The list is long, the outcomes uncertain, the market risk high.

But nowhere is this more apparent than in well-worn arguments over the validity and future of Europe's single currency -- the new milennium's posterchild for political economy.

Newspapers and Democracy in the Internet era: ‘The Italian Case’

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repubblicaCarlo de Benedetti, Chairman, Gruppo Editoriale L’Espresso/La Repubblica, will deliver the 2009 Reuters Memorial Lecture on ‘Newspapers and Democracy in the Internet era: The Italian Case’.

The Reuters Memorial Lecture commemorates journalists who have lost their lives in pursuit of their profession.

Italy forces migrants back to Libyan abuse

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Bill Frelick- Bill Frelick is Human Rights Watch‘s refugee policy director and the author of “Pushed Back, Pushed Around: Italy’s Forced Return of Boat Migrants and Asylum Seekers, Libya’s Mistreatment of MIgrants and Asylum Seekers“. The opinions expressed are his own. -

On May 6, for the first time since World War II, a European state ordered its coast guard and naval vessels to intercept and forcibly return boat migrants on the high seas without screening to determine whether any passengers needed protection or were particularly vulnerable. That state was Italy; the receiving state was Libya. The Italians left the exhausted passengers on a dock in Tripoli, where the Libyan authorities immediately detained them.

From afar, G8 seeks a handle on Afghanistan

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Luke Baker- Luke Baker is a political and general news correspondent at Reuters. -

The mountains and deserts of southern Afghanistan are far removed from the elegant charms of Trieste in northern Italy, but there will be a link between the two this weekend.

Foreign ministers from the Group of Eight nations meet in the Italian city on the Adriatic on Thursday for three days of talks, with the state of play in Afghanistan, as well as developments in Iran and the Middle East, front and centre of their agenda.

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