The situation in Italy appears to be going from bad to worse. With a confidence vote pending for Tuesday as the government dissolves into chaos for the umpteenth time, and following the resignation of the CEO of one of Italy’s largest non-financial corporations (Telecom Italia), the largest bank (by assets) in Italy – Intesa SanPaolo has announced – effective immediately – the resignation of its CEO and replacement with Carlo Messina. According to sources, the now former CEO had lost the confidence of shareholders (which is odd given the bank’s stock is near 2-year highs). We can’t help but wonder Ayn Rand-like at the devolution of the ruling class in Italy and what happens next (in light of the crumbling manufacturing and production data).
As we noted previously, things do not look so good for Italy (as a reminder the 3rd most indebted nation in the world)…
Italy’s Stability Program targets a 5%-6% primary budget surplus, and 3% nominal GDP growth. Both strike JPMorgan’s Michael Cembalest as unrealistic in the context of post-crisis Italy. Italy ran a 6% surplus for a brief moment in the 1990’s but it didn’t last, as it was the result of a prior devaluation helping growth, some asset sales and some tax increases. Only asset sales seem feasible in Italy right now, if anything.
Friend —
Imagine pulling up to your local grocery store after work. You are surprised to find the parking lot empty. Curious, you walk in to investigate only to find all the fresh produce, milk, and other perishable aisles are empty. Even the canned foods have been wiped clear of the shelves. You frantically search through aisle after aisle only to realize all the food in the store has vanished.
