Italy’s No-Growth Update

OK I’m on a roll, so I’m going to stick my neck out. This slide in the Italian confidence index apparently surprised the ‘experts’. Well it shouldn’t have surprised Fistful readers who have been following what I have been saying. Clearly these confidence indexes are not the last word in sliced bread. But they do mean something, and Germany’s Ifo index just turned in another bad reading too.

Ever since Parmalat, I have been asking one simple question: will Italy ever grow again? Of course, the simple answer is possibly it will: never say never. But will it ever get back to vigorous growth: this I doubt. I am even half asking myself if we will see positive numbers in more than say 50% of the forthcoming quaters. Remember, if my demographic thesis has any predictive power it should be precisely here in Italy that the Titanic starts to take in water. Parmalat was simply the iceberg. Of course my thesis could always be wrong. Any takers?
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Parmalat Update

Well, well, what do you know: Paramalat’s real debt is much bigger than was first thought. What a surprise. According to the Financial Times Parmalat’s gross debt now stands between ?14.5bn and ?14.8bn ($18.08bn-$18.46bn). At the same time its main Italian operations barely made a gross operating profit last year. Meantime Italy’s unions are threatening a strike iif the government reduces the regulatory role of the central bank. The dispute has arisen as a result of the Parmalat scandal, which the government blames partly on a failure of oversight at the central bank. As a solution the finance ministry wants to reform financial market regulation in Italy so that the central bank would no longer supervise corporate bond issuance and competition in Italy’s banking sector. The unions object to this.

Actually this was meant to be a quick post, but while writing it I cannot help reaching the conclusion that Italy may be begining to fall apart. Just wait till you read this.
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Important News For Europe

OK I’m pushing the point quite hard here, but what I want to emphasise is that a European blog in a global world has a pretty broad reach. The latest round of US employment figures are in, and they are nowhere near as pretty as everyone (including even me) was expecting. Over 400,000 people stopped looking for work due to the fact they considered the jobs weren’t available. The most important thing is that manufacturing industry is expanding production without hiring, in fact jobs were lost, while hours worked went down not up as they should have if the recovery was really gathering momentum.

So the situation is extraordinarily complex, the big Asian wheel keeps on rolling, the US turns round and round but not quite quickly enough, energy leaks out of the system, and we here in Europe catch the backdraft. Which means that today the euro touched another record high of $1.2868 before falling back slightly. Economics as they say is not a zero sum game, so among the possible results are both win-win, and lose-lose. America’s discomfort is not our great opportunity.

Meantime back over here the Parmalat scandal trundles on with the Bank of America offices in Italy being raided, and Grant Thornton expelling its Italian business – which currently has two of its partners in prison – from its global network.
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Parmalat: Just Another Scandal?

On a day which sees the Parmalat heat being turned up to full blast, with a looming ‘cara a cara’ between former Chief Financial Officer Fausto Tonna and Parmalat chief legal counsel Gian Paolo Zini, and while in the United States a class action law firm has named investment bank Citigroup Inc and auditing firm Deloitte & Touche Tohmatsu among defendants in a lawsuit against the food group – a lawsuit incidentally filed on behalf of a U.S. pension fund (oh when, oh when will we get class action lawsuits here in Europe) – on such a day it might well be worth asking ourselves one simple question: is this just another one-off scandal?
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