The Easy Work in the EU is Done . . . Now for the Tough Stuff

So the EU got creditors to take a 50% haircut on Greece, agreed to boost (if they can get China to fund it) their fund for saving the day and all is well in the world. The DOW is up like 1200 points in a month, which is freakin' incredible, and all our problems are behind us. Well, tell that to Italy.

http://online.wsj.com/article/SB10001424052970203554104577003401844568884.html?mod=googlenews_wsj

It seems that the sixth biggest economy and the country with the fourth most debt in the world is not quite getting the benefit of all this. Their ten year bonds are still requiring 6% and that is hardly bearable. They have relatively low unemployment, lower than the U.S., but they also have an incredibly low population percentage wanting to work, with a lot of people retiring before 50, so that artificially alters the unemployment numbers. You see, unemployment numbers are based on those who say they want to work who cannot find work. Those who have given up do not count. If they did, the U.S. rate would be well into double figures.

So let's get back to Italy. They make Greece's issues look like the flea on the tail of the dog. I mean we are talking serious dollars to bail out Italy and it just isn't going to happen (especially after Italy has been doing a good job of pissing off officials in France and Germany, who likely consider Italians lazy bastards). Even after the great EU news Wednesday, Italy has seen no relief in what they are having to pay to refinance their debt. In other words, they are still screwed. And if you think China is coming in to save the day, then you have underestimated the intelligence of the Chinese. Now I am not saying China will not do it, but if they do China will have a lot of stings attached that long term will benefit China and hurt the EU. But hey, beggars cannot be choosers.

Sure, with or without China, things will sail for a while, but that Italy ship is coming into port soon and it has a certain stench to it. Prepare thy self. I do not think China is willing to put enough at risk to stem the tide.

http://www.nytimes.com/2011/10/29/business/the-spotlight-now-shines-on-italy-common-sense.html

Disclosures, none other than I think I have some Italian shoes.