As the saying goes; “a week is a long time in politics”, but in Silvio Berlusconi’s situation it’s been an incredibly short week.
Last week he’s schmoozing Chinese officials in an attempt to woo China in the hope that China will become the de facto bank of last resort for Italy and indirectly prop up the Euro, this morning all bets are now apparently off with China and in a mutually exclusive event Italy’s credit rating is mercilessly downgraded by Standard and Poor’s. The suspicion is that Chinese officials may have been engaging in economic war games over the Euro with the USA.
However, as always the Italian premier’s past appears to haunt him, articles have been published by the Guardian and Telegraph in the UK and numerous other international publications over the weekend and today, suggesting that during trips to China in 2008 Berlusconi took Giampaolo Tarantini as part of his entourage, a cocaine dealer suspected of arranging prostitutes for Berlusconi. At least Tarantini didn’t accuse the Chinese of eating their babies, an accusation levied at Berlusconi in 2006. Berlusconi later played down these accusations insisting that he was misquoted, what he really said was that the Chinese under Mao Zedong “boiled babies”, he later refused to withdraw his remarks when pressed by reporters, saying it was an “historical fact”.
“I am accused of having said that the [Chinese] Communists used to eat children,” he said. “But read The Black Book of Communism and you will discover that in the China of Mao, they did not eat children, but had them boiled to fertilise the fields.”
He later tried to calm the furore, telling Italian TV: “It was questionable irony, I admit it, because this joke is questionable. But I did not know how to restrain myself.” The world’s press waits with baited breath for his reaction to China’s snub and S&P’s downgrade…The small mercy is that we owe thanks and gratitude to the Italian premier for knocking Greece off top spot in macro economic news…for now..
The S&P downgrading of Italy will once again raise fears of contagion, Italy’s economy and debts dwarf those of Greece, notwithstanding that fact the question of certain French bank’s solvency may once again be brought into question, given several were downgraded by Moody’s last week. The suspicion is that Greece has been the convenient punch bag for economic bad news relating to the Eurozone for months, whilst quietly and inefficiently France and Italy have failed to get their own house in order.
Germany cannot avoid the spotlight, despite continually playing the victim role in Europe’s farce their culpability should be acknowledged. Whilst German banks may pay a heavy price if Greece ultimately defaults their exposure to Italian and French banks is massive in comparison.
Whilst not in Berlusconi territory, the rowing back and selective memory of Tim Geithner (the USA treasury secretary) was equally bizarre. Having been diplomatically ridiculed for suggesting Europe should follow the USA’s example of ‘recovery’, Geithner said that new crisis-fighting measures may eventually be agreed, even after some European officials poured cold water on his proposals at a summit in Poland at the weekend.
“I think you’re going to see them draw on the lessons of our crisis, draw on the lessons of things that worked here in the United States,” Geithner said in a Bloomberg Television interview yesterday in Washington. “I think you’ll see that reflected in some of the choices they make.”
In overnight/early morning trading the Nikkei closed down 1.61%. the Hang Seng closed up 0.51% and the CSI closed up 0.39%. European markets have been positive this morning, the STOXX up 1%, the CAC up 0.73%, the DAX up 1.43% and the UK ftse up 0.65%. the SPX future is suggesting a marginally positive open. Gold is up $11 an ounce and Brent crude up $64 a barrel.
Publications to make note of today from the USA include the house building permits granted and housing starts both released at 13:30 gmt.