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Germany says eurozone can't save Italy

Published: 07 Aug 2011 11:38 GMT+02:00

Economic advisors told the news magazine Der Spiegel on Sunday that the European Financial Stability Facility (EFSF) is only capable of helping smaller countries, not economies the size of Italy's.

Government experts say Italy's eurozone partners cannot cover the guarantee for Italy's state debt of over €1.8 trillion.

The report says Berlin is now insisting that Italy find its own way out of its crisis through budget cuts and reforms.

Economists already believe that the EFSF needs to be increased anyway. At the moment, the eurozone has agreed to put €440 billion into the fund, but once Greece's bailout has been withdrawn, there won't be enough money to support other ailing economies like Portugal.

A new system, the European Stability Mechanism, will replace the EFSF in 2013.

Italian Prime Minister Silvio Berlusconi said Friday that Italy would speed up its reform programme. He said the new aim is to balance the state budget by 2013, one year earlier than previously planned. The Italian government presented a savings package in July.

The Local/bk

The Local (news@thelocal.de)

Your comments about this article

11:59 August 7, 2011 by nemo999
Italy way out of the current situation is called default. Call it Greece II or is it Greece III, or Greece IV, I get so confused. Leverage is great on the way up but a real bitch on the way down. PS and yes they do expect Germany to pay for the party, if the Euro is to remain. Maybe they can ask China to step in, China really need another currency to take the place of the dollar, since they are seeing the dollars they hold getting smaller and smaller every day.
12:05 August 7, 2011 by jomamas
Comment removed by The Local for breach of our terms.
12:30 August 7, 2011 by BarryB
jomamas - Turkey's economy is doing very well - and that success has nothing to do with immigration - check your facts before you make such racist remarks.
12:42 August 7, 2011 by marimay
What does Turkey have to do with this anyway? Jomama has mental problems...

Anyway, what a surprise. Goodbye EU.
12:54 August 7, 2011 by yourholiness
Stopping immigration now is a very good idea if one thinks western culture is worth saving.

No matter what the state of Turkey's economy, admitting it to the EU would be a cultural and political catastrophe for western europe.
13:06 August 7, 2011 by Asgarli
You guys really have serious problems, what does Turkey have to do with all of this? The article mentions Turkey nowhere.
13:23 August 7, 2011 by nec123
oh my..! Christian club is down?
13:34 August 7, 2011 by harcourt
Italy could always ask the Vatican to bail it out. It is rich enough and has plenty of contacts all over the world !!
13:53 August 7, 2011 by hankeat
Berlusconi should cut down his sex parties budget. Moreover I believe he (and all his mafias) have enough moneys to save Italy. We should let them solve the problem themselves.
14:00 August 7, 2011 by brapp
Great. The EU self-destructs. Not before time. All EU apparatchiks to be armed with shovels to work on farms to repay the citizens of Europe for the economic failure of their "grand vision".
14:05 August 7, 2011 by Mohamed_hs90
I am not Turkish or European. But I believe that in the coming days maybe Turkey would be the only hope for the EU.

and for guys talking about stopping immigration. EU and Germany wont be able to continue without immigration. whether its Turkish or Asian or Eastern European immigration. This is life you have to compromise, Either the immigrants or living poor.
14:15 August 7, 2011 by marimay
Turkey would never be dumb enough to join the EU anyway. It is just a funny game.
14:25 August 7, 2011 by harcourt
Yes the attraction of being a member of the EU is definitely on the wane !
14:28 August 7, 2011 by nec123
@yourholiness : as a Turk, i , too , agree with you. I prefer all Turks ( no kurd please ) come back home and work for their own country.
14:32 August 7, 2011 by yourholiness
Well thank God for that at least.

Unfortunately whether its Italy, Greece, Spain or Portugal its obvious the whole structure is rotten. Its also clear that Germany will pay almost any amount to hold it up. Not that its going to matter in the end when the US falls into recession. I wonder how much punishment the german taxpayers will absorb before rising up in revolt.
14:45 August 7, 2011 by nec123
after all Turks come back home , you Germans can send two more ship to Turkey to sail for Russian ports...
15:29 August 7, 2011 by Lachner
I think that the European Union is on the verge of collapse and German citizens will soon demand the return back to the Deutsche Mark. It simply does not make sense for German taxpayers to have to bail out countries like Greece, Ireland, Italy, Portugal and soon Spain and France, that clearly have no control over their spending and government corruption.

I am deeply concerned with the global economy as the United States' credit rating has been recently downgraded (first time in history) and they are on the verge of defaulting their debt. Even worse, the stock markets around the World are crashing and the dismantling of the EU will trigger widespread global panic. I think we are in for some tough times just around the corner. May God have mercy on all of us!
16:03 August 7, 2011 by harcourt
Interesting that Greece, Ireland, Portugal, Spain, and now Italy are some of the most religious countries in Europe. Is it that they put their faith in God to help them out of their financial situation!! Que Sera Sera
16:08 August 7, 2011 by Poldark
I believe it is the duty of every German to work harder and longer than they do now and do not take anymore holidays so the Greeks, Irish, Italians etc, can enjoy the standard of living they have become accustomed to.

Alphonso.
17:06 August 7, 2011 by sigfus45
Look no further than Icelands recent problem with money. Shut the banks down, re-organize the banking system, prosecute and jail the corrupt bankers arrogant enough to believe they were invincible. Pay back the depositors in an orderly fashion. Even the Brits have quit whining and threatening, and that is difficult to accomplish. Bailing out countries or loaning money to those who have no intention, capability or willingness to pay it back is just good sense in not doing.

The U.S. isn't even close to default. They are close to sending themselves into an economic depression through political stupidy. Take heart in the words of Winston Churchill; " You can always count on Americans to do the right thing - after they've tried everything else."
17:30 August 7, 2011 by Poldark
sigfus, how long could the US keep borrowing more and more money and keep printing it. The rate they were going interest payments would be more than tax receipts in the not too distant future.

The US has got to borrow another $2.5tn, where is this money coming from?

The ECB needs 2tn euros to back the PIIGS, where is this money coming from?
17:53 August 7, 2011 by harcourt
Poldark #21

Yes it's getting worryingly like the Weimar Republic
20:11 August 7, 2011 by nemo999
According to US Treasury Figure as of March 2011. 4.514 Trillion Dollars of the 13.342 Trillion Dollar debt is being held by parties or governments out side of the United States. This 31.4 percent is held by parties or government exterior to the United States. 68.6 percent of the United States debt his held internal to the United States. The United States Central Banks, and Federal and State Banks holding a majority of the debt. Pension Funds and mutual funds are second. For every dollar the US has to borrow a little over 31 cents is coming from outside of the United States.
20:13 August 7, 2011 by yourholiness
The US has found out the hard way that it cannot play the world's policeman without substantial help from its friends. A huge military is unsupportable these days with threats coming from increasing directions ie. terrorist attack, cyber warfare, muslim jihadism, etc. etc. Could we be on the verge of the new dark age narrowly avoided with the defeat of Nazism and Communism in the last century. My children might find it very rough going before it gets better.

I hope their generation is as capable as the generation that beat down fascism just a few short years ago. Unfortunately multiculturalism may be the straw that breaks the camel's back. The huge effort and forbearance required to educate the world's untutored masses may sink us all in the end.
20:25 August 7, 2011 by DrStrangelove
Or in other words, good bye Euro. About time, too - let's get it over with.
20:47 August 7, 2011 by Dizz
No they just need to devalue the Euro but are too pig-headed and egomaniacal to admit it. It wouldn't even hurt them too much (because of a lot EURO zone trade is intra) but they would get all the benefits.

*Dons fireproof underpants and awaits flaming*
21:18 August 7, 2011 by nec123
I have a 100 GERMAN MARK left from old good days still keeping . Looks i will spend it soon...
21:33 August 7, 2011 by crm114
this discussion is very one sided. ChrisRea come and defend the €
23:35 August 7, 2011 by ChrisRea
To defend it against who? I haven't seen any decent argument, only old-lady-style grumble.

Economists more qualified than the posters on this thread clearly stated even before 1999 that a single European currency will not happen or it will not last. For example, Martin Feldstein said in 1997 that the single European currency will lead to high inflation very fast. More recently, Douglas McWilliams of the Centre for Economics and Business Research said the single currency "may not even survive the next week" (that happened in early June 2010). All these wise economists were proved wrong. Even countries outside the European Union adopted the euro as official currency.

I am not that good to forecast the future of the euro. But with China committing to support the euro, I would not hurry to buy the German marks from nec123.

Question for doom forecasters: when exactly do you predict that the euro will die?
23:43 August 7, 2011 by 1234asdf
@26

devaluate the Euro??

Great idea lets punish all the austrian, dutch, french, german, finnish, belgian, slovenian, slovakian , cypriot people for the piigs state problems.

Btw a lot of comments make no sense. What has turkey to do with this?

To the weimar comment: read some history books this is far far away from the weimar inflation its completly different in every way. And it will never come (if at all) to those magnitudes of inflation not even close.

worst case scenario: The PIIGS states that cant deal with the crisis will leave the Eurozone willingly. Go to their old currency and devaluate it. Or France and Germany decide to close the whole thing.
23:53 August 7, 2011 by DepotCat
@ 1234asdf Interesting comment about the PIIGS going back to their old currency. How much would it cost and how long would it take to do this I wonder..??
01:25 August 8, 2011 by mhdamro
Germany has two options to take ... either to back the EURO .. or go back to DM .... the second option will be far more costly than backing the EURO .. because this will over value the deutsche mark and rise inflation in germany ... which in turn make it harder for german companies to sell their products overseas ....

- backing the euro would be the "wise" and only option the german government have ... but since germany is paying to bail out the PIGS ... they should get something in return .... which is the right to dictate these PIGS on how to cut the debt .... and restructure the banking system ....

- last but not least .... when dealing with countries like spain or italy .. germany cant bail them out .... the wise choice will be to introduce "euro bonds" in which the debt is shared among all the euro countries ... thsi will increase interest rates of borrowing for countries like germany , netherlands and france .... and lower it for greece, spain , and italy ....

- for a future stable monetary system to work in the EU .. brussels will have to have more control over local policies ... i.e to integrate the EU more and more .... something like the federal states of europe ..... with a central federal bank ...( by the way .. they are not far away from doing that ...!!!!!!!!!!)
01:26 August 8, 2011 by Dizz
@30 how does it punish them if it makes the zone more competitive globally? I understand that it makes purchases more expensive if an economy is import dependent, hence my comment also that a sufficiently large proportion of EURO zone trade is internal for them not face that consequence. So the internal open market concept is preserved and the zone as a whole becomes more competitive.
03:13 August 8, 2011 by theKirk
In any case, continuing to throw good money after bad only delays what a sensible person would already view as a forgone conclusion.
08:42 August 8, 2011 by heyheyhey
Instead of enjoying watching Italy struggle we could all vacation there and help their economy.
09:26 August 8, 2011 by rugbycoach
Euro supporters should note that the markets will not wait for the time that governments will require to pass the neccessary legislation to increase the EFSF. Current treaties do not allow yet for the kind of financial integration that would be required to create something big and stable enough.. Additionally the extra debt incurred by countries contributing to the bailout fund puts even more pressure on those countries in trouble. (Italy Spain have to contribute).
11:22 August 8, 2011 by michael4096
Wake me up when the euro gets from 1.40 to 1.20 againt the dollar, never mind parity which was where it was designed to be.

I tend to agree that the result of all this will be integration faster than many people would like. I think integration a good idea and I don't have any fear, but I recognise that integrating too quickly will bring its own problems.
12:59 August 8, 2011 by sella
so what would the italian do now?i tought they where the strongeres country in europe.
14:22 August 8, 2011 by ioann
Riiiight, all these southern countries are lazy people and that's the problem and they are responsible for the economic crisis... so are the US also lazies? Or France and Belgium, who are next, will they also fall because they're lazies?
18:39 August 8, 2011 by Jack Kerouac
The German authorities have made a mistake bailing Greece out. Now, everyone with a poor economy will expect a bailout, spearheaded by Germany, the IMF, and the EFSF. What is the motivation for these countries to resolve their own debt when their larger, more productive neighbor always saves them? No one is learning anything. The EU is as good as over if the continue this way, and that's shame.
19:15 August 8, 2011 by BrainWave19
PIIGS nations have already damaged the EuroZone...what else is left out would be smashed by the American Debt crisis and all of the developed world would be in economic slavery....to..maybe China....did Nostradamus predict this?
07:50 August 15, 2011 by Dr. V
Government experts say Italy's eurozone partners cannot cover the guarantee for Italy's state debt of over €1.8 trillion??? Are you kidding???

Who's going to save Germany then, because Germany's 2011 Q1 Goverment Debt is over 2 Trillion Euros. Germany's Q2 Government Debt is also over 2 Trillion Euros.

Check it out at Eurostat, the Official Statistic Office of the EU, it's not an opinion, it's fact.

France is listed at 1.646 Trillion Euros, Italy at 1.868 Trillion Euros, and the worst of all, Germany with 2.088 Trillion Euros in Quarterly Government Debt.

Why is this not headline news worldwide? This is only Goverment Debt, not total debt which is far worse than you think.

So, please explain to me why the German Press is saying France & Italy are so far in debt they can't be helped, when Germany themselves are in debt up to their neck?

Germany is the problem, always was, always will be. They are clearly the masters of spin and illusion. Unfortunately, all of this information in a 112 page report is being rapidly circulated throughout the finance industry as we speak, I personally forwarded over 60 copies throughout London & New York.

Just because Germany isn't talking about it, doesn't mean it's not happening.

Germany wants the herd to beleive all the other countries are weak, naturally they believe any thing. Germany want everyone to believe that Italy is going down, they are actually just angry that an Italian (Draghi) is taking over as the new ECB President, meaning Germany can no longer use the ECB as it's personal cash register. If Italy can hold out until Draghi gets into office, they will get all the support they need. The result could be that Germany finds itself No. 2 in the EU, and we all know the Germany pschye cannot accept this. As an act of containment, they immeadiately banned all short sales.
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