The Corner

Uh Oh

Via the BBC:

Italy’s cost of borrowing has touched a new record, a day after Prime Minister Silvio Berlusconi said he would resign once budget reforms are passed. The yield on 10-year government bonds reached more than 7%, the highest since the euro was founded in 1999. Investors fear that Italy could become the next victim of the debt crisis. The 7% level is widely viewed as unsustainable and was the point at which Portugal, Greece and the Irish Republic were forced to seek a bailout. In comparison, Germany’s implied cost of borrowing for one year is just 0.24%.

 

The BBC’s business editor Robert Peston said: “No one wants to lend to a country when that country would use the loan to pay the interest on previous loans – that’s throwing good money after bad.”

Some things to remember:

 

Italy would not be facing these questions about its ability to repay its debt if it had kept its own currency.

 

As things stand, the EFSF (the Eurozone’s bailout fund) is not large enough to rescue Italy. Once it has been resolved how (in detail) it will be leveraged, and once it has found investors willing to lend to it (would you?), that might change, but that’s going to take time, and Italy may well not have the time.

The European Central Bank is holding the line for now, but it to be able to stop Italy’s liquidity crisis becoming a solvency crisis, markets have to know that the ECB has the ability to turn on the printing presses, something which (for understandable reasons) Germany is resisting.

 

Bleak.

Most Popular

Culture

Jussie Smollett Changes His Story Again

The actor Jussie Smollett continues to talk about the alleged January 29 attack on him during a frigid night in Chicago, giving Good Morning America his fullest description yet of his claims. It differs substantially from what he told police initially after the alleged assault. Smollett told GMA that the ... Read More
Politics & Policy

We’ll Regret This

Mitch McConnell says the president will sign the budget deal and he will also declare a national emergency to build the wall, as I expected. We’ll see the legal justifications he uses, but as a political and constitutional matter this is a long-term disaster. Oh, it might be good for Trump according to the ... Read More
White House

The Failure of the Deal

EDITOR’S NOTE: The following is Jonah Goldberg’s weekly “news”letter, the G-File. Subscribe here to get the G-File delivered to your inbox on Fridays. Dear Reader (But especially Sammie), I had my say on the emergency declaration yesterday, and I’m sure I’ll have to say it all again not very far ... Read More
Politics & Policy

Capitalism’s Cold War

The story of capitalism since the 1980s has been that of a kind of cold war between capital and politics. In the decade prior, American government was at the nadir of its prestige and credibility. The so-called War on Poverty, launched with great fanfare and idealism in the late 1960s, quickly collided with ... Read More
U.S.

Trump Declares National Emergency to Fund Border Wall

President Trump declared a national emergency on Friday in order to unilaterally appropriate $3.6 billion for the construction of his long-promised border wall. The announcement, made during a televised White House Rose Garden ceremony, came after Congress passed a bipartisan homeland-security-funding bill ... Read More