“Greece is not the future of Italy,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman.
It may have some similarities with Greece, where investors are just
waiting for a default. And as a negative, the “scale of the Italian
challenge is far greater than Greece’s as Italy’s sovereign debt is
bigger than Greece, Ireland, Spain and Portugal’s put together.”
Its debt burden – the highest of any countries besides the U.S. and
Japan – makes it a big problem for the International Monetary Fund and
European Union, which have bailed out those other peripheral nations.
The coffers of the European Financial Stability Facility they’ve come up
with to address sovereign debt problems are simply not big enough
plenty of analysts have said.
“If Italy is locked out of the capital markets, as other peripheral
countries have been, neither the IMF nor EU (through the EFSF) have yet
to marshal the resources to fund Italy for even next year,” Chandler
said.
However, in general, Italy is better off. And in a note Wednesday, he laid out five reasons why:
- Italy’s average debt maturity is much longer, meaning any rise in yields is not an immediate problem and “will take some time to filter through into Italy’s debt burden.”
- Italy collects many more taxes than its debt service costs, even if it hypothetically had to pay 7% on all its debt.
- Its overall debt burden – combining private and public debt – is relatively low compared to developed countries.
- More than half of Italy’s debt is held domestically, which gives the government a little more say. For example, “bond swaps can be foisted on domestic institutions. Domestic institutions can be required to hold more government bonds in, say, pension portfolios.”
- Finally, Italy “has other sources of wealth.” The country has a whole lot of gold – the fourth highest reserve in the world.
“This is generally true of Europe as a whole. There is great wealth.
There is sufficient wealth in Europe in general and Italy in particular
to address the debt crisis.”
So what it comes down to is if Europe can again show the coordination and determination to resolve the problem.
Funds from China, other emerging market countries or foreign vulture
funds “are not needed, if European will was greater,” Chandler said.
“Italy’s problem is primarily one of confidence not solvency.”
“A policy response must be forthcoming in short order or the contagion will overwhelm everything else.”
0 comentarios: