The 100 billion euro (US$126 billion) rescue for Spain’s banks moves Italy to the frontline of Europe’s debt crisis, putting pressure on Italian Prime Minister Mario Monti’s unelected government to avoid succumbing to a market rout.
“The scrutiny of Italy is high and certainly will not dissipate after the deal with Spain,” Nicola Marinelli, who oversees US$153 million at Glendevon King Asset Management in London, said in an interview. “This bailout does not mean that Italy will be under attack, but it means that investors will pay attention to every bit of information before deciding to buy or to sell Italian bonds.”
Italy has more than 2 trillion euros of debt, more as a share of its economy than any advanced economy after Greece and Japan. The treasury has to sell more than 35 billion euros of bonds and bills per month — more than the annual output of each of the three smallest euro members, Cyprus, Estonia and Malta.
“The problem for Italy is that where Spain goes, there’s always the perception that Italy could follow,” Nicholas Spiro, managing director at Spiro Sovereign Strategy in London said in an interview. “’There is insufficient differentiation within the financial markets. It is clear as the light of day and has been that Spain’s fundamentals are a lot direr than Italy’s. That hasn’t stopped Italy suffering from Spanish contagion.’’
Italy is on track to bring its budget deficit within the EU limit of 3 percent of GDP this year and the country is already running a surplus before interest payments, meaning its debt will soon peak at about 120 percent of GDP. The jobless rate is less than half of Spain’s 24 percent, and Italy didn’t suffer a real-estate bust, leaving its banks healthy by southern European standards. The budget deficit at 3.9 percent of GDP last year, is less than half that of Spain.
To be sure, a total debt more than twice Spain’s gives investors pause, especially in a country where economic growth has lagged the EU average for more than a decade. The euro region’s third-biggest economy, Italy is set to contract 1.7 percent this year, more than the 1.6 percent in Spain, the Organisation for Economic Co-operation and Development estimates.
The exodus of foreign buyers has left the treasury more dependent on Italian banks, which in turn have been among the biggest borrowers in the European Central Bank’s (ECB) three-year lending operations. Italy returns to markets before Spain does, selling as much 6.5 billion euros of treasury bills tomorrow, followed by a bond auction on Thursday.
“If Italy has a problem with accessing the markets because investors lose confidence in the Italian ability to do the right thing, the ECB will be drawn into the fire,” said Thomas Mayer, an economic adviser to Deutsche Bank AG, in a telephone interview. “That could pose a potentially lethal threat to European monetary union.”
Given the size of Italy’s debt, only the ECB has the firepower to rescue the country and yet deploying that ammunition — through buying back bonds or making more long-term loans — may prove unacceptable to Germany and its allies in northern Europe, Mayer said.
There may be little Italy can do on its own to protect itself. Monti, appointed by the president to succeed former Italian prime minister Silvio Berlusconi in November last year when Italy’s 10-year yield exceeded 7 percent, has implemented 20 billion euros of austerity measures, overhauled the pensions system and revamped the county’s labor markets and service industries.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Sales in the retail, and food and beverage sectors last month continued to rise, increasing 0.7 percent and 13.6 percent respectively from a year earlier, setting record highs for the month of March, the Ministry of Economic Affairs said yesterday. Sales in the wholesale sector also grew last month by 4.6 annually, mainly due to the business opportunities for emerging applications related to artificial intelligence (AI) and high-performance computing technologies, the ministry said in a report. The ministry forecast that retail, and food and beverage sales this month would retain their growth momentum as the former would benefit from Tomb Sweeping Day