As far as I’m concerned, the rules of baseball are the sporting equivalent of the fourth secret of Fatima. But like everyone, thanks to American movies and TV series, I know that golden mean: if the batter fails to hit the pitcher’s ball three times, he’s out. Strikes 1, 2 and 3. After that, strikeout. The referee throws his fist forward like a karate move. Game over. Today Minister Giorgetti is the arbiter of Italy. And he has just signaled a strike 2. The first was the drastic stop on the superbonus, an act of authority with very few precedents in terms of decision-making. Moreover, in the light of record countervalues for a sector of the economy with a high GDP multiplier and consensus rate. But the accounts were jumping for that 110%, from one day to another stop. Now the favorable technical opinion on the Mes represents strike number 2, since net of everything it contains a couple of qualifying elements.
First, it breaks the taboo: the ESM is good for the BTPs. Translated: for three years we have benefited from an ECB that drained every issue, guaranteeing us refinancing at no cost. And despite that, our spread incorporated a risk premium basis that never allowed it to drop steadily into double digits. Today, with over 400 billion in gross issues, if we don’t ratify the Mes, the cost and interest bank will jump. Second element: the Government does not think of really using the delaying and blackmailing strategy with the EU, showing the ratification of the Mes as a bargaining chip for a less rigorous Stability Pact. Without the ok from the Italian Parliament, the Mes new version skips. And with it the implicit insurance of a variable Spain dramatically expanded in the amounts available, in the event of a banking crisis. If this happens, our BTPs become legitimate targets. 2011 should have taught us the rules of the game. That opinion from the Mef served as an alarm clock, a reminder, a post-it on the refrigerator. But a post of two square meters. Because time is running out. And in fact, chaos in the Commission and postponement of each file to the date of June 30, when the Pd motion in favor of ratification should go to the Chamber. In this way, the Government intends to take time to negotiate with the EU.
Minister Giorgetti reminded everyone that the EU is already blackmailing us today, given that third tranche of the Pnrr that has been arriving for six months now. And be careful: 30 June is the deadline for blocking Eurovita redemptions, all in the light of an agreement on the newco of the five white knights still to be ratified. At the Mef they have something else and more urgent to think about. And this should be enough to understand the seriousness of the situation. Two days earlier, on the 28th, almost half a trillion in Tltro pandemic loans to be repaid to the ECB: needless to say, our and Greek banks will suffer the worst haemorrhage. In short, be careful: strike 3 is not far away. Certainly not as much as the European elections.
All around, in fact, a deluge of increases. The Bank of England shocks everyone with a 50 basis point rate hike, just like Norway. While Switzerland limits itself to 25 basis points. In fact, a consolidation of the global trend. Even the new governor of the Turkish central bank, ex Goldman Sachs, brings the cost of money to 15% with a leap of 650 basis points in a single shot in the hope of curbing inflation nominally at 40%. Translated, recession guaranteed. But not just any recession, lady recession. Because if another confirmation were needed, the PMI manufacturing and services indices published yesterday morning seem to speak a single line: in June, European economic activity slowed down. Very. The first fell to 43.6 against the expectations of 44.8 driven downwards by a Germany increasingly in crisis, the second paid for the drastic and unexpected worsening of the French data and stood at 52.4 against the 54.5 of the forecasts.
And here the question is all about interpretation. Indeed, almost an approach. Exactly as in Margin call, since the analyst’s cautious optimism who speaks of a music that is slowing down is contrasted by the boss with the certainty that the music has stopped and now only silence is heard. And as in the film, the basis of everything lies in understanding not what trend and volume present today’s rhythm. But what we will dance (or not dance) in a month or a quarter or a year. And in the case of macro indicators, there is little to be happy about. This first graph speaks very clearly in this regard: the Leading Economic Index (Lei) tells us the current correlation is very similar to that of 1990, 2001, 2008 and 2020. Not exactly years to remember or frame. Unless you’ve been heavily shorted.
On the other hand, this second graph concerns us. Very. More than the manufacturing PMI published today, what happened yesterday should worry us: inversion of the Bund’s 2-10 year curve to -94 basis points, the highest since 1992. Another annus horribilis, at least for Germany.
And why does this concern us directly, while the clash over the Mes seems to take on increasingly countdown tones not only with Europe, but also within the Government itself? First, Northern Italy is substantially dependent on the role of subcontracting and manufacturing machinery for Teutonic industry and manufacturing. Translated, the current crash will come like a tsunami at the end of the summer on orders. In full credit crunch. And with Emilia-Romagna crippled, therefore with a GDP item that will fail in its driving role. Second, this final image shows it to us: according to a national Insa survey published two days ago, Alternative fur Deutschland is today the second political force in the country on a par with the SPD of the incumbent Chancellor. And just 6.5 percentage points short of the Christian Democratic Union.
Here we are not talking about ex-GDR, here we are talking about the entire Federal Republic. And if it seems impossible even to think of a hypothesis of a future black-blue or black-yellow-blue government, such Eurosceptic sentiment and anti-expansionary policies and support for indebted countries leave little hope with respect to a soft approach by the Bundesbank in the negotiations on the Stability Pact. Not surprisingly, Giorgia Meloni ran to Paris. But a possible misstep on the Mes, already from the expected arrival in the classroom next week, could really cause damage. Serious
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2023-06-24 04:17:19
#SPY #FINANCE #Italy #risks #strikeout
