Barclay's: Italy may be beyond the point of no return

**boutons_deux** · 11-27-2011

Eurocarnage Continues

Things are only going from bad to worse in Europe.

Reader Antifa had noted in comments that the IMF had expanded access on Thursday to borrowing facilities via a Precautionary and Liquidity Line (PLL), which would allow “responsible” borrowers to take down five or perhaps as much as ten times their normal allotment. But I don’t agree with his/her hopeful view that this meant the IMF was acting as lender of last resort. Only the ECB, an issuer of euros, can play that role.

Mr. Market seems to think so too. Italy had a disastrously bad bond auction today, a mere €10 billion of two year notes and six month bills (remember, the day of reckoning comes in February, when Italy has to roll €300 billion). The rate on the bills was 6.50%; on the notes, 7.81%. Three year note yields rose as high as 8.13%. Even though the ECB intervened, buying both Spanish and Italian debt, it barely made a dent. Yields in Italy on two to five year paper remained in the 7.67% to 7.77%

German bond yields were also higher than they were after Wednesday’s terrible bunds auction. Stunningly, Belgian ten year yields have risen more than 1% this week, from 4.79% to 5.85%, with a downgrade of Belgium to AA by Standard & Poors no doubt contributing.

The Financial Times also reports that investors are fleeing Eurobank stocks:

Uninvestable is just about the worst word in a shareholders’ vocabulary.

The term – meaning that the market sees no point at all in investing in a certain asset – is being used increasingly when talking about European banks.

“It is an absolute disaster zone. I wouldn’t touch them. You couldn’t make me buy a bank,” says Paul Casson, director of pan-European equities at Henderson Global Equities.

Even some bank chief executives seem to agree. “I’d be very interested to see the investor who is prepared to put more capital towards UK banks. All of them are thinking that’s a dumb place to put capital,” Stephen Hester, chief executive of RBS, the part-nationalised UK lender, said this week.

http://www.nakedcapitalism.com/2011/...=Google+Reader

Meanwhile, the MSM totally forgets how Iceland kicked its bankers asses and charged them:

Why Iceland Should Be in the News, But Is Not

The 2008 world financial crisis was the coup de grace. The three main Icelandic banks, Landbanki, Kapthing and Glitnir, went belly up and were nationalized, while the Kroner lost 85% of its value with respect to the Euro. At the end of the year Iceland declared bankruptcy.

Contrary to what could be expected, the crisis resulted in Icelanders recovering their sovereign rights, through a process of direct participatory democracy that eventually led to a new Cons ution. But only after much pain.

What happened next was extraordinary. The belief that citizens had to pay for the mistakes of a financial monopoly, that an entire nation must be taxed to pay off private debts was shattered, transforming the relationship between citizens and their political ins utions and eventually driving Iceland’s leaders to the side of their cons uents. The Head of State, Olafur Ragnar Grimsson, refused to ratify the law that would have made Iceland’s citizens responsible for its bankers’ debts, and accepted calls for a referendum.

In the March 2010 referendum, 93% voted against repayment of the debt. The IMF immediately froze its loan. But the revolution (though not televised in the United States), would not be intimidated. With the support of a furious citizenry, the government launched civil and penal investigations into those responsible for the financial crisis. Interpol put out an international arrest warrant for the ex-president of Kaupthing, Sigurdur Einarsson, as the other bankers implicated in the crash fled the country.

But Icelanders didn't stop there: they decided to draft a new cons ution that would free the country from the exaggerated power of international finance and virtual money. (The one in use had been written when Iceland gained its independence from Denmark, in 1918, the only difference with the Danish cons ution being that the word ‘president’ replaced the word ‘king’.)

http://www.google.com/reader/view/fe...arch/iceland/0