Free Republic
Browse · Search
Topics · Post Article

Skip to comments.

Is Italy the Next Cyprus? ^ | March 23, 2013 | Mike Shedlock

Posted on 03/23/2013 8:53:13 AM PDT by Kaslin

Once trust is lost it is very slow to recover. For now, much of Europe is acting as if it believes Cyprus is a "one time" thing? But isn't that what we heard about Greece? Who is next? Italy?

In an article on Handelsblatt the chief economist of Commerzbank says: Italy should bring a unique wealth tax.

It is a myth to talk of crisis-strapped states. Even the German Institute for Economic Research (DIW) and the chief economist of Commerzbank, Joerg Kraemer says the numbers suggest a different view.

Kramer relies on surveys of the European Central Bank. Net financial assets of the Italians are 173 percent of gross domestic product (GDP). This is significantly more than the net financial assets of the Germans, which corresponds to 124 percent of GDP, said Kramer for Handelsblatt Online.

"So it would make sense, in Italy for a one-time property tax levy," suggested the Bank economist. "A tax rate of 15 percent on financial assets would probably be enough to push the Italian government debt to below the critical level of 100 percent of gross domestic product."
Reader Bernd suggests Kraemer means a net tax on all assets not just financial ones, but either way the idea is preposterous. Banks always want bailouts to fall on the backs of private citizens not on banks.

Italy's Companies Face Slow 'Death' as Credit Crunch Deepens

While pondering the above confiscation threat, Ambrose Evans-Pritchard the Telegraph reports Italy's Companies Face Slow 'Death' as Credit Crunch Deepens.

Confindustria, the business federation, said 29 percent of Italian firms cannot meet "operational expenses" and are starved of liquidity. A "third phase of the credit crunch" is underway that matches the shocks in 2008-2009 and again in 2011.

In a research report the group said the economy was caught in a "vicious circle" where banks are too frightened to lend, driving more companies over the edge. A thousand are going bankrupt every day.

Franco Bernabè, the head of Telecom Italia, echoed the warnings, lamenting that firms are literally "dying from lack of liquidity". He called on the Bank of Italy to take bolder action to head off disaster. "The Italian economy is being suffocated. The country must intervene rapidly to reinject funds into the economy", he said.

Late payments have become a chronic problem across the board in Italy, with 47,000 official complaints last year. The research group CGIA di Mestre said half of small companies cannot pay their staff on time.
Loans To Businesses and Households Plunge

Backing up what Ambrose Evans-Pritchard said with hard data, the Italian site Il Sole 24 Ore reports New Fall in Bank Lending to Households and Businesses.

Loans to businesses and non-financial families continue to face strong decrease. In February, according to the estimates in the monthly report of ABI were down 2.84% trend (-2.79% in January).

In 2012 there has been a strong leap in non-payments, up 8.8% compared to 2011. Compared to 2007, the last year before the crisis, the increase is 45 percent.

Total gross non-performing loans amounted to 6.4% in January 2013, up from 5.4% a year earlier (+17.5% YoY). With regard to small businesses, NPLs has more than doubled since 2008, rising from 3% to 7.4%. NPLs in family businesses rose from from 7% to almost 12 percent. Gross NPLs totaled 126.1 billion in January.

In the construction sector companies the number of non-payments rose by 10,700 with a
increase of 80% since 2007.
Italy Proposes Easing Stability Pact

In the "Germany is Not Going to Like This" category, Il Sole 24 Ore reports Italy Proposes Easing Stability Pact while lowering growth estimates and increasing deficits.

The government intends "loosen the constraints of the stability pact to allow the use of further resources."

Italy finance minister Vittorio Grilli says the proposal is to "increase our potential debt of 20 billion per year in 2013 and 2014, to create the cash on hand to pay for" expenses.

In this context, the government cuts economic growth forecasts: GDP in 2013 will drop by 1.3% from a previous estimate of -0.2%. GDP is expected to drop by 1.7% in 2014.

The 2013 deficit was revised up to 2.9% from 1.8%. The minister stressed that the increase of debt of 40 billion, to pay the debts of the government, is the "ceiling."
Reflections on "The Ceiling"

Note the euphemism "create cash on hand to pay for expenses" by going another 40 billion in debt. Also note the increase in debt of 40 billion euros is "the ceiling".

Care to bet? If so, care to bet that GDP estimates will not be lowered again?

TOPICS: Business/Economy; Editorial; Germany; Israel; Russia; United Kingdom
KEYWORDS: albania; beppegrillo; cyprus; europeanunion; germany; greece; hungary; israel; italy; russia; turkey; unitedkingdom

1 posted on 03/23/2013 8:53:13 AM PDT by Kaslin
[ Post Reply | Private Reply | View Replies]

To: Kaslin

In engineering, it’s called a cascading failure. Event one, oil running out, causes event 2, blown bearings, causes event 3, locked wheels, causes event 4, multi-car pile-up, causes event 5, massive shooting incident as protection teams assume it’s a trick, causes event 5...ending with the fall of banks, nations, the European economy, the Fed steps in with a massive cash infusion, Unicorns appear. Cue dramatic music…The oceans begin to recede, Earth begins to cool, we have a dialog on race, everybody kills everybody else, ‘cause these things to not work out.

2 posted on 03/23/2013 9:00:42 AM PDT by Gen.Blather
[ Post Reply | Private Reply | To 1 | View Replies]

To: Kaslin

Those one time emergency taxes never turn out to be the solution because elected political trash...those that get elected to rob Treasury’s around the world lack the fortitude to cut programs and other give-a-ways.

I know we’re talking about Italy but the same thing is happening here.

What a terribly covetous nation we’ve become. Esp with all the uncivilized ‘perfect voters’ demanding to live as well as the taxpaying hard workers.

The only solution I see is a poll tax based on property or wage taxes.

3 posted on 03/23/2013 9:11:56 AM PDT by exPBRrat
[ Post Reply | Private Reply | To 1 | View Replies]

To: exPBRrat

Taxes are like heroin, once government gets a taste, they’re hooked.

4 posted on 03/23/2013 9:16:58 AM PDT by dfwgator
[ Post Reply | Private Reply | To 3 | View Replies]

To: Kaslin

California was Cyprus before Cyprus was Cyprus.

Anyone see The Weekly Standard’s recent cover article on that state?

I was amazed to learn 1/3 of the nation’s welfare recipients are from California.

Heck, you add in New York (city) and Chicago...I bet you’ve got 40%....

5 posted on 03/23/2013 9:26:03 AM PDT by SoFloFreeper
[ Post Reply | Private Reply | To 1 | View Replies]

To: Kaslin
Once trust is lost it is very slow to recover

This should be sent to each and every one of our elected officials....daily if not more often.

6 posted on 03/23/2013 10:06:11 AM PDT by Don Corleone ("Oil the the cannoli. Take it to the Mattress.")
[ Post Reply | Private Reply | To 1 | View Replies]

To: Gen.Blather

” For want of a nail....”

7 posted on 03/23/2013 10:43:08 AM PDT by Kozak (The Republic is dead. I do not owe what we have any loyalty, wealth or sympathy.)
[ Post Reply | Private Reply | To 2 | View Replies]

To: Gen.Blather
In engineering, it’s called a cascading failure.

Bump the engineering thing, but that is physics and logic. check the tagline.

8 posted on 03/23/2013 12:16:25 PM PDT by VRW Conspirator (Cyprus - the beginning)
[ Post Reply | Private Reply | To 2 | View Replies]

To: Kaslin

Italy was another Cyprus before Cyprus was, Mr. Mike Hedgehog.

9 posted on 03/23/2013 4:59:19 PM PDT by familyop (We Baby Boomers are croaking in an avalanche of rotten politics smelled around the planet.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: dfwgator

That’s pretty much my take on the whole thing.
The governments have become junkies.
This won’t end until they hit bottom. or worse.

10 posted on 03/24/2013 5:45:27 AM PDT by Texas resident (I'm not a lawyer, but I play one on FR)
[ Post Reply | Private Reply | To 4 | View Replies]

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794 is powered by software copyright 2000-2008 John Robinson