September 14, 2012
European Stability Mechanism Bailout fund and Outright Monetary Transactions set a new ground for EU weak countries to relieve their economies while taming international speculation, at least for some time.
Access to OMT, managed by the European Central Bank, is conditional to strict and precise rules based on the fiscal pact plus a bit to be revealed later. The sooner those rules will be itemised the better or speculation will grow like weed. My feeling is that the terms for access to these funds, if demanded by a country, will be a subject of negotiations between the ECB, the German Central bank (prominent paymaster), the EU Commission and possibly the International Monetary fund within December 2012, given that the entire programme would start in January 2013.
Spreads of potential early candidates to OMT, Spain and Italy, have calmed down somewhat: 4.2% for Spain and 3.5% for Italy, an abundant 1 per cent each. Spread in other Eurozone countries have also receded at fractional percentage points while the German OAT has marginally increased, but this is physiological.
As the reader probably knows Italy is bound for political elections by April 2013 and parties are in a state of agitation; the incumbent government led by Mario Monti has entrenched a number of reforms that parliament is trying to water-down with limited success. Monti has anticipated that it is not his intention that to run for a new mandate, then which are the alternatives? The situation is very uncertain, at a time when a smooth transition would be of the highest importance.
Six months to elections, the number of unresolved state of affairs among political parties is frightening high. Parliament’s wrangling to change the electoral law abounds and the eventuality to allow voters to put a name of their choice in the ballot is uncertain (nominated candidates only can be voted at present).
One aspect is clear, however, parties are keen to regulate their individual interests rather than those of the Country, productivity being the main area of concern. In this climate the present technical cabinet would better anchor important reforms to ESM directives before its expiration to guarantee that the Country does not change direction with a new executive establishment.
The present political nomenclature is old both in age and thinking (with the exclusion of M5S, a young populist movement) while new generations are either educated according to old principles or find it difficult to join the race.
Partito Democratico (left), led by Bersani, is campaigning for Primaries; the leader is challenged among others, by the rampant Matteo Renzi (Florence mayor) holding liberal ideas, and could attract a number of “rightist” to the center-of-left, considering the possibility of a future coalition with “Unione di Centro” led by Casini.
It is the likely winning coalition, considering that the research agency IPSOS recently polled this group at 31.4%. If this event turns true Italians shall be inured to a reinforced clerical influence due to many centrists being sympathetic with the Vatican.
Popolo Della Libertà (right), led by Berlusconi –still undecided if to compete- is rated at 21.9% and considering that scandal-ridden Lega Nord, their former partners, have lost most voters PDL will probably run on their own with little chance of success, whether with or without Berlusconi.
A third improbable coalition would be that formed by M5S (Movimento 5 Stelle – Grillo) and IDV (Italia Dei Valori – Di Pietro), summing up 17.9+7.5=25.4% as of last week.
M5S is a recent populist movement (unsympathetic to the Euro) reuniting the very young and a substantial chunk of voters offended by political scandals and inefficiencies.
IDV, a former ally to PD, has recently shifted from a centrist to a populist stance, probably to match the new assumed partners. Should Renzi (PD) win the Primaries, in all likelihood many voters of this group would move to Partito Democratico, depleting their chance to significantly affect the new cabinet of the future legislature. Given the recent IDV manoeuvring it becomes questionable if this party should still be part of the European ALDE Group.
And I wonder, are we really sure that Mario Monti will not bow to the demands coming from many quarters?Elio Pennisi