{"id":222,"date":"2013-02-23T18:02:21","date_gmt":"2013-02-23T23:02:21","guid":{"rendered":"http:\/\/www.dougsbriefcase.com\/blog\/?p=222"},"modified":"2013-02-24T17:32:35","modified_gmt":"2013-02-24T22:32:35","slug":"italy-holds-elections-tomorrow-and-many-observers-fear-a-muddled-outcome","status":"publish","type":"post","link":"https:\/\/www.dougsbriefcase.com\/blog\/italy-holds-elections-tomorrow-and-many-observers-fear-a-muddled-outcome\/","title":{"rendered":"Italy holds elections tomorrow and many observers fear a muddled outcome"},"content":{"rendered":"
\"Bersani<\/a>

Last minute plea from Ital\u00adian voters.<\/p><\/div>\n

Italy\u2019s nation\u2019s cur\u00adrent leader, Mario Mon\u00adti, the dar\u00adling of Europe\u2019s gov\u00adern\u00ading class, is run\u00adning fourth among the cur\u00adrent slate of can\u00addi\u00addates. He trails come\u00addi\u00adan Beppe Gril\u00adlo, whose obscen\u00adi\u00adty-laced rants are draw\u00ading big crowds and may pro\u00adpel him beyond his cur\u00adrent third place posi\u00adtion. Pier Lui\u00adgi Bersani, the Cen\u00adter-Left can\u00addi\u00addate, leads the pack, but he\u2019s being pur\u00adsued hard by the nev\u00ader-bor\u00ading Sil\u00advio Berlus\u00adconi. Mr. B is try\u00ading to reclaim the office from which he was roust\u00aded 15 months ago in favor of Mario Mon\u00adti, who was appoint\u00aded to head a \u201ctech\u00adni\u00adcal government.\u201d<\/p>\n

The gen\u00ader\u00adal think\u00ading is that Bersani will hold on to win a plu\u00adral\u00adi\u00adty of votes and com\u00adbine forces with Mon\u00adti to form a new gov\u00adern\u00adment. But while that is still thought to be the most like\u00adly out\u00adcome, it is far from a sure thing. Poll data are not fresh, since Ital\u00adian law pro\u00adhibits polls from being pub\u00adlished close to the elec\u00adtion, and any late move\u00adment by vot\u00aders is thought to dis\u00adfa\u00advor the front-run\u00adner Bersani and the dour Mon\u00adti, to the ben\u00ade\u00adfit of more flam\u00adboy\u00adant can\u00addi\u00addates like Gril\u00adlo and Berlusconi.<\/p>\n

That could lead to an out\u00adcome in which it is dif\u00adfi\u00adcult or even impos\u00adsi\u00adble for any of the can\u00addi\u00addates to form a gov\u00adern\u00adment, as hap\u00adpened in Greece in 2011, leav\u00ading a coun\u00adtry already beset with high unem\u00adploy\u00adment and a shrink\u00ading econ\u00ado\u00admy in polit\u00adi\u00adcal chaos.<\/p>\n

Despite pro\u00adfound ide\u00ado\u00adlog\u00adi\u00adcal dif\u00adfer\u00adences among the can\u00addi\u00addates, they all seem to agree that aus\u00adter\u00adi\u00adty mea\u00adsures under\u00adtak\u00aden by the Mon\u00adti gov\u00adern\u00adment should be rolled back. When Mon\u00adti took office, Ital\u00adian bond rates were soar\u00ading and threat\u00aden\u00ading to push Italy into default. Mon\u00adti calmed the bond mar\u00adkets with a pro\u00adgram of high\u00ader tax\u00ades and low\u00ader social spending.<\/p>\n

That pro\u00adgram is large\u00adly viewed as a suc\u00adcess by every\u00adone but Ital\u00adian vot\u00aders. They are angry. Under Monti\u2019s lead\u00ader\u00adship, tax\u00ades and unem\u00adploy\u00adment soared, pen\u00adsion ben\u00ade\u00adfits were delayed and reduced, and the econ\u00ado\u00admy con\u00adtract\u00aded. All of the can\u00addi\u00addates are now run\u00adning against the Mon\u00adti agen\u00adda. Mon\u00adti him\u00adself promis\u00ades to roll back some of the tax\u00ades that his gov\u00adern\u00adment insti\u00adtut\u00aded or raised. But that is only net\u00adting him an esti\u00admat\u00aded 15 per\u00adcent of the vote, as his oppo\u00adnents say they would go much further.<\/p>\n

With fis\u00adcal rec\u00adti\u00adtude on the ropes, a mud\u00addled elec\u00adtion result increas\u00ading\u00adly like\u00adly, the ECB\u2019s announce\u00adment this week that it holds a mas\u00adsive port\u00adfo\u00adlio of Ital\u00adian gov\u00adern\u00adment debt on its bal\u00adance sheet, and the EU\u2019s assess\u00adment that Italy\u2019s econ\u00ado\u00admy con\u00adtin\u00adues to con\u00adtract (along with that of the rest of the Euro\u00adzone), you would expect investors to be spooked.<\/p>\n

You would be wrong.<\/p>\n

On the last trad\u00ading day before tomorrow\u2019s elec\u00adtion, the Ital\u00adian stock index rose 1.4 per\u00adcent and yields on Ital\u00adian 10-year notes dropped by more than 4 basis points. \u2028\u2028I\u2019m not sure why this bar\u00adrage of bad news leads investors to bet on Italy, but the fact that they are able to offload Ital\u00adian bonds onto the ECB\u2019s bal\u00adance sheet seems the most plau\u00adsi\u00adble fac\u00adtor. Investors, large\u00adly pri\u00advate Ital\u00adian banks, are will\u00ading to buy the Ital\u00adian government\u2019s debt, so long as they know that the ECB<\/span> will take it off their hands.<\/p>\n

The ECB<\/span> for the first time this week dis\u00adclosed just how much Ital\u00adian gov\u00adern\u00adment debt<\/a> it has tak\u00aden on: 102.8 bil\u00adlion euro ($135.6 bil\u00adlion) , near\u00adly half the total amount the ECB<\/span> has print\u00aded to bail out finan\u00adcial\u00adly trou\u00adbled Euro\u00adpean gov\u00adern\u00adments and more than twice the amount issued to the sec\u00adond-place ben\u00ade\u00adfi\u00adcia\u00adry (Spain, 44 bil\u00adlion euro).<\/p>\n

This is a stun\u00adning vote of no-con\u00adfi\u00addence in Ital\u00adian debt. Under its mas\u00adsive cash-for-trash pro\u00adgram, the ECB<\/span> prints euro and exchanges them for Ital\u00adian bonds that pri\u00advate investors pur\u00adchased. Italy can finance its debt at afford\u00adable rates large\u00adly because investors know that they dump the bonds onto the ECB<\/span>. This allows the Ital\u00adian gov\u00adern\u00adment to con\u00adtin\u00adue bor\u00adrow\u00ading and rolling over cur\u00adrent debt at rea\u00adson\u00adable rates despite a shrink\u00ading econ\u00ado\u00admy and the grow\u00ading poten\u00adtial for polit\u00adi\u00adcal cri\u00adsis. \u2028\u2028Per\u00adhaps a gov\u00adern\u00adment no longer needs eco\u00adnom\u00adic growth and polit\u00adi\u00adcal sta\u00adbil\u00adi\u00adty to live beyond its means. All it takes is a cen\u00adtral bank will\u00ading to for\u00adgive all sins.<\/p>\n","protected":false},"excerpt":{"rendered":"

Italy\u2019s nation\u2019s cur\u00adrent leader, Mario Mon\u00adti, the dar\u00adling of Europe\u2019s gov\u00adern\u00ading class, is run\u00adning fourth among the cur\u00adrent slate of can\u00addi\u00addates. He trails come\u00addi\u00adan Beppe Gril\u00adlo, whose obscen\u00adi\u00ad\u00adty-laced rants are draw\u00ading big crowds and may pro\u00adpel him beyond his cur\u00adrent \u2026 Con\u00adtin\u00adue read\u00ading \u2192<\/span><\/a><\/p>\n","protected":false},"author":3,"featured_media":221,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","wp_typography_post_enhancements_disabled":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"nfd_image_url":"","nfd_onboarding_generated":"","footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[14],"tags":[],"class_list":["post-222","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-global-economy"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t