Italy on cusp of end-time market meltdown. EuroZone scrambles to contain sovereign bankruptcy contagion. New Berlusconi corruption exposed.
With a flurry of new bond auctions imminent, a sovereign debt of €1.5 trillion, a debt-to-GDP ratio of over 100% and the largest pile of net notional credit default swaps in Europe outstanding, Italy is this week trembling on the lip of a financial vortex.
Apart from the negative economic fundamentals, the markets are critically spooked by EuroZone and Italian political paralysis and the emergence of major new corruption scandals involving the Italian Prime Minister, Silvio Berlusconi, and the Italian Finance Minister, Giulio Tremonti. And it doesn't help that the two men are openly disagreeing with each other about national tax cuts and austerity measures.
Berlusconi has been forced into a humiliating U-turn after a key clause in proposed new Italian legislation was condemned across the political spectrum for being tailor-made to preferentially support his crumbling business empire.
Small print buried deep in the Italian finance ministry's new austerity package would have allowed Silvio Berlusconi's Fininvest holding group to suspend a €750m compensation payment to rival press baron Carlo De Benedetti. In the face of strident objections from opposition MPs, judicial organisations and members of his own government, Berlusconi announced that the offending paragraph would be deleted from the finance package. The paragraph dealt with delaying compensation payments of more than €20m in civil cases ahead of upcoming Supreme Court rulings.
The controversial offending paragraph was not present in the official version of the document drafted by the Italian Treasury, but it was included in the final executive draft delivered to the Italian President from the Prime Minister's office for official signature. Silvio Berlusconi is said to have personally instructed this deception. The scam was identified at the last moment, the paragraph was removed again, and the Italian President, Giorgio Napolitano, signed the €47bn Italian austerity package into law on Wednesday 6th July 2011.
July 11, 2011