Executive Intelligence Review
Subscribe to EIR


Italian Finance Minister Warns of Blowout

June 24, 2010 (EIRNS)—Speaking at the yearly ceremony of the Italian Financial Police, Finance Minister Giulio Tremonti warned against an imminent blowout of the financial system, driven by the derivatives bubble, and called for bringing to an end the creation of derivatives paper. This statement, on the eve of the annual meeting of the G8/G20, gives a small glimpse into the kinds of discussions on the real state of the financial system, which are going on behind the scenes.

"The economy is still threatened by the risk of a dramatic and devastating new financial 'offside,' " Tremonti said, using soccer terminology. "Today, on the markets, the notional value of the 'over the counter' derivatives is equal to 12 times the value of world GDP, exactly the same as before the collapse of banking pyramids in Autumn 2008. The financial mass has grown, and continues to grow disproportionately and for itself, and threatens the real economy, in the imminent and permanent form typical of systemic risk."

The previous day, Tremonti had made similar statements in a forum on the Papal Encyclical Caritas in Veritate, together with Vatican banker Ettore Gotti Tedeschi in Milan. We have lost two years, Tremonti said, because, since the 2008 crisis, "nothing has been done" to bring derivatives under control, as reported by the daily Avvenire. Proposals so far implemented or drafted are "insufficient," unless "we prevent the use of derivatives contracts to anticipate and distribute future wealth." The White House and the EU have recently taken some actions, but we must still "brake the mechanism."