Instability in Italy’s Investments: Blame Game Greece
They say that George Michael of Wham! fame had some Italian in him…or was it Greek? No matter since both countries seem to be in on this latest financial debacle. And that might not be so far from what’s happening with the Italian financial markets as of late. Just last week, according to an article in The News, there were warnings in the capital of “possible downgrades by ratings agencies and amid fears of contagion from Greece’s sovereign debt crisis. Banking shares plummeted perhaps in response to rumors of “an imminent downgrade of Italy’s sovereign rating” and the “spread between Italian and German 10-year-bonds peaked to the highest since the establishment of the Euro.
Italy Take Cover
One analyst pointed out that the impact the Greek crisis is having on other countries has already been affecting markets for quite a few days and now it’s clear that “Italy is in the line of fire.” UniCredit shares – the country’s biggest bank – has plummeted too. Indeed, it dropped a substantial amount – over 8 percent – mid-trading “before recovering somewhat to close down 5.54 percent.” Others impacted in a similar way included: “Banca Popolare di Milano, Banca Monte dei Paschi di Siena, Intesa Sanpaolo and Mediobanca.” Indeed, there were even whispers about some of the country’s banks possibly failing the European banking system’s “stress tests.” Trading in Milan had been termed “schizophrenic” amid a “panic” situation and the action was termed a “midday of fire.” Things certainly have looked better for Italy and its markets.
Vile Volatility
So why all this volatility? What’s happening with the instability? It has been said that the recent announcement in Brussels of Jean-Claude Trichet’s replacement as European Central Bank head of Mario Draghi this coming November, could have been a catalyst. They don’t want to see Draghi go; he is well-known for how he handled the financial crisis in Italy, rendering its banking system “relatively unscathed.”
But in an effort to quiet the panic, Silvo Berlusconi (the country’s PM) warned that “locusts of speculation were waiting to attack Italy on financial markets at the first sign of weakness and urged unity within his embattled government.” But he himself isn’t exactly flavor of the month, having gone through quite a few local electoral defeats in the last month. But he is still determined to protect his country financially, and promised that they will “avoid ending up like other European countries that are being bled to survive.” Only time will tell if Berlusconi can keep his promise and come to his country’s aid.
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