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Rajoy versus Monti
Written by: PaxForex analytics dept - Friday, 27 June 2014 0 comments
Italian Prime Minister Mario Monti and Spanish Prime Minister Mariano Rajoy are meeting in Madrid in order to discuss how to proceed with the looming bailouts of their countries. Super Mario, President of the ECB, was very proud to announce his bond buying bonanza nobody really wants or asks for it as it is tied to severe austerity measures and the countries first need to beg the ESM and subscribe to their conditions before Super Mario is allowed to take Browsers Castle.
Monti as well as Rajoy have both rejected new austerity measures as they understood, or at least pretended to understand, that more austerity will keep their countries in a recession longer than as if they would apply those measures. The economic socialists have forced heavy austerity measures onto Greece in order to bailout that country. Greece slowly starts to understand that the austerity measures forced onto them were meant to disable the Greek government to function so that
Greece can be put into receivership by Northern Europe, Germany especially. Monti tried to pull a quick one on Rajoy and tried to pressure him into seeking a full bailout for Spain which would have eased borrowing costs for Italy. Rajoy quickly decided to not be pressured by outside sources and drew up his own plan which will leave Spain torn into several different pieces with the looming secession vote of Catalonia and increased activity from the Basque separatists. Monti’s plan failed as expected and Spain
Dumb money was hoping that Spain would falter and that Rajoy would burry one knee into the sand while begging for a bailout from the ESM which would have blanketed the country with severe austerity measures a la Greece. After the austerity measures would bite Super Mario planned to purchase Spanish debt and interfere with markets hoping it would stabilize the debt contagion once and for all. Italy would have benefited from that move which is what Monti hoped for.
Global financial markets calmed down to a certain extent after Super Mario announced his plan, but unless Spain and Italy ask the ESM for a bailout first and subscribe to severe austerity measures the ECB will not act. They played that game with Italy once and got burned so they appear to have learned from their previous mistake, for now.
Silvio Berlusconi said that he would withdraw support for Monti’s government which means that the Northern League will attempt to form their own government soon and create more instability as well as uncertainty in Europe as the Northern League will never beg for a bailout. A report by Der Spiegel stirred nervousness as it mentioned that public creditors in Greece are facing losses and Germans are still anti-bond purchases for a good reason.
Germany does not have to worry about ECB bond purchases as neither Spain nor Italy is willing to sacrifice its citizens for the greater good of the Eurozone. The global market place waits to see who will blink first; Monti or Rajoy. Berlusconi entered the scene again and the focus may shift to Italy’s internal problems. Monti and Rajoy both face severe pressures from within as well as outside the country and soon we will find out who will be the stronger man.