Executive Intelligence Review

FROM EIR DAILY ALERT


The Financial Warfare Against Italy Has Started

Oct. 9, 2018 (EIRNS)—The letter by EU Commissioners Valdis Dombrovskis and Pierre Moscovici to the Italian government on Oct. 5 has unleashed what anyone could expect: a run on Italian bonds. The famous “spread” went over 300 points yesterday, to fall slightly under that mark today. (The spread is the difference between Italian bond yields and the benchmark German bond. Thus, 300 points means that the yield on the 10-year bond is slightly over 3%, with the German yield being close to zero. Theoretically it means that Italy will pay 3% more to roll over its debt, but this becomes a practical question, depending on when and how the debt is rolled over.)

This morning, the IMF joined in the charge by downgrading growth estimates for Italy this year and next year. “We have seen the spread increase and this has helped the downgrading,” said IMF chief economist Maurice Obstfeld.

The stock market plunged Monday, Oct. 8, as banks’ stocks suffered fears that a coming downgrading of the Italian sovereign debt will unleash a bank crisis.

Such a downgrading by rating agencies is what European Central Bank President Mario Draghi warned about (threatened) in his secret meeting with Italian President Sergio Mattarella last week. Italian bonds are two notches above “non-investment grade” (junk). A downgrading means that European elites are willing to play with fire. Since Italy is too big to bail out, a banking crisis will probably bring the end of the euro and might trigger the event waiting to happen, namely the global financial collapse.

Italian government leaders have exposed the so-called “market reaction” as a political operation. Everybody could see that it was the Moscovici-Dombrovskis action that unleashed the run on the bonds. Those Eurocrats are going to be voted out next spring, and this was quite ironically shown when Dombrovskis’ party in Latvia got crushed in the general elections on Sunday, Oct. 7, going from 19.9% to 6.7% (the pro-Russian party “Harmony” won). In France, where Moscovici was finance minister, his Socialist Party (PS) has almost disappeared from the political landscape.

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