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 We have finished our review of the Italian "Austerity" plans to whip its debt load into shape. As with Greece (see "Greek Crisis Is Over, Region Safe", Prodi Says - I say Liar, Liar, Pants on Fire!), we have found it wanting. Believe it or not, the biggest issue is the credibility of the government. They stretch the facts, assumptions and gray areas to the point where you tend to doubt everything else. It is almost as if they believe no one will actually read what they have written, which very well may have been partially true in the past. Alas, that was the past and this is the present. Information, and to a lesser extent, knowledge travels through the web at the speed of atomic particles.  On that note, I release to my subscribers the pdf  Italy public finances projection 2010-03-22 10:47:41 588.19 Kb.

For those that don't subscribe, I would like to make clear that my assertions of flagrant and unsubstantiated optimism on the part of European governments stem from how quicly they feel their economies will grow despite the fact that they failed to see this maelstrom coming in the first place.

This is Italy's presumption of economic growth used in their fiscal projections:

italian_real_gdp_growth.png

The Greek government's macroeconomic assumptions also seem overstated when compared with EU estimates.

greek_debt_forecast.png

I don't think the EC's assumptions are sufficiently stringent enough. Thus, if the EC is a little optimistic, what does that make Greece and Italy?

 greek_strikes.png

Of course, if you still believe in the integrity of EU government numbers, then I suggest you carefully plow through Smoking Swap Guns Are Beginning to Litter EuroLand, Sovereign Debt Buyer Beware! Even the most naive and gullible of us will start to doubt...

 You see, the Italian economic situation wasn't that great to begin with since they were one of the hardest hit in the recession of 2009.

italian_real_gdp.png

 If their overstatement of the ability to pull out of this falls flat (which it most likely would) then you will see a spike in devt service and interest, of course accompanied with the tried and true "Nobody could have seen this coming" statement from the BIS. No, not the Bank for International Settlements, but the Bureau of Internal BS (excuse my Italian).

italian_interest_expenditure.png 

Above, you see the Italian government projections of interest expenditure as compared to ours. We have not fully factored in the full potential of tax revenue collapse due to the after effect of a sharp recession, but I do believe you get the picture.

Subscribers should reference the our Italian Banking Macro-Fundamental Discussion Note  for a list of banks that may be affected by the drag of excess debt on the Italian economy.

The Pan-European Sovereign Debt Crisis, to date: 

  1. The Coming Pan-European Sovereign Debt Crisis - introduces the crisis and identified it as a pan-European problem, not a localized one.
  2. What Country is Next in the Coming Pan-European Sovereign Debt Crisis? - illustrates the potential for the domino effect
  3. The Pan-European Sovereign Debt Crisis: If I Were to Short Any Country, What Country Would That Be.. - attempts to illustrate the highly interdependent weaknesses in Europe's sovereign nations can effect even the perceived "stronger" nations.
  4. The Coming Pan-European Soverign Debt Crisis, Pt 4: The Spread to Western European Countries
  5. The Depression is Already Here for Some Members of Europe, and It Just Might Be Contagious!

  6. The Beginning of the Endgame is Coming???

  7. I Think It's Confirmed, Greece Will Be the First Domino to Fall 

  8. Smoking Swap Guns Are Beginning to Litter EuroLand, Sovereign Debt Buyer Beware!
  9. Financial Contagion vs. Economic Contagion: Does the Market Underestimate the Effects of the Latter?
  10. "Greek Crisis Is Over, Region Safe", Prodi Says - I say Liar, Liar, Pants on Fire! 
  11. Germany Finally Comes Out and Says, "We're Not Touching Greece" - Well, Sort of...
  12. The Greece and the Greek Banks Get the Word "First" Etched on the Side of Their Domino

  13. As I Warned Earlier, Latvian Government Collapses Exacerbating Financial Crisis