Spain and Italy, the awful nightmare disguised by Draghi's LTRO's

No added comment is needed here from this blogger, just a quote of two consecutive paragraphs from the Acting Man blog of today linked here:

We would point out here: although the market is currently cutting Spain some slack in the wake of the ECB's LTRO's, Spain's debt situation is not any better from what it was in November of last year when the market panic was at its height. On the contrary, the situation is clearly worse now, as the government had to admit that last year's deficit was higher than advertised and that this year's will again be higher than originally planned. In short, if the market was in panic in November, it would actually have even more reason to be in panic today. This underscores that the main determinant of short term financial market action are perceptions and sentiment. Facts like those cited above work to alter these perceptions over time. Just wait for the LTRO effect to dissipate, and we will likely be back at square one.

Italian Shenanigans

Last week it was revealed that Italy had to pay Morgan Stanley some $3.4 billion in January that it owed on account of a derivatives trade that has blown up (more precisely, an interest rate swap that went exactly the wrong way – for Italy, that is). It seems that this is only the tip of the iceberg however: Italy is in the hole by $31 billion on its various outstanding derivatives bets.

Monti & Draghi propose lumping unused EFSF funds with ESM

The two Italians, whose country of birth faces a debt mountain of indescribable proportions and a system of economic governance akin to some of the worst economies of the third world, have this afternoon come up with a new cracking idea to get their hands on outside cash, according to the Telegraph, linked here. A quote:

Doubling the European Stability Mechanism's (ESM) firepower would reassure markets while driving down borrowing costs for the debt-wracked countries of the eurozone, Mr Monti is said to have argued.

Mr Monti had won backing for the proposal from European Central Bank President Mario Draghi, who proposed using unused money from the EFSF to boost the size of the new fund to about €750bn, according to reports in German weekly Der Spiegel, which cited unnamed sources.

Lagarde & Draghi branded "CARRASCO" in Portugal!

Markets rallied in the Far East early today according to this report on the presumed grounds that the IMF is about to step in to save Italy, (would the world have the wherewithal.)

More interestingly for me was an earlier report, also from the Sydney Morning Herald, with a report on Portuguese demonstrations against the vicious cuts imposed by the Euro Group and that country's leadership upon their population. The resolute faces of the women shown, and their banners with the visages of the head of the IMF and ECB, each so fittingly branded Carrasco, which in English I believe is most accurately translated as "Executioner". See it from here.

EU tyranny looms - Trichet vs Issing

Two important contributions to the mad descent of the EU towards tyranny have been published over the past day or so.

The first is Jean-Claude's letter to Italy setting out the detail of his illegal assumption of (supreme) power, linked here, while the other is the counter argument, put by former Bundesbank Chief Economist and ECB Board Member, Ottmar Issing as described by Bill Jamieson, in The Scotsman, linked here.

This is all crucially important stuff, almost being completely ignored elsewhere in what is normally the mainstream media's silly season. Ignore it at all our perils! More on the progress of this non-democratically imposed legislative package on Italy from the WSJ, linked here.

Update 0900 BST - A good analysis of the market moves and growing financial dangers is linked here.

Trichet's Heir Apparent Struggles on Goldman Sachs

Update 1200 ECT: This video being provided by EurActiv has been heavily cut. I will try to find a version withe the questions being asked included and post it below when I am able.