Market Update:
All eyes are watching Europe this week as Greece and Italy work our debt issues. The outcome will certainly affect the world.
Support for Berlusconi Ebbs Before Crucial Vote
As Italy’s 10-year borrowing costs, a measurement of investor anxiety over its future, reached a new record of 6.71 percent, and as Mr. Berlusconi readied to face a vote in the lower house that would clarify his remaining support, Mr. Bossi asked the prime minister to relinquish his post in favor of Angelino Alfano, the secretary of Mr. Berlusconi’s Peoples of Liberty Party.Mr. Berlusconi said earlier that he would decide his future moves after the vote, a routine verification of the 2010 budget that has taken on immense political import for the prime minister after the defection in recent days of a number of lawmakers in his party.
Italian news media reported Tuesday that Mr. Berlusconi had been feverishly at work contacting the dissenters from the majority to change their minds. The prime minister has reiterated repeatedly in recent days that the coalition must stick together to pass a series of austerity measures that will placate the financial markets that have targeted Italy’s financial vulnerabilities. No less than the future of the euro and Europe is at risk, he has said, playing on a national sense of responsibility to rein in his detractors.
But critics counter that Mr. Berlusconi is among the chief reasons for the financial attacks on Italy. The scandal-plagued prime minister, who is on trial for corruption, tax fraud and paying for sex with a minor, has worn away what had been left of his international credibility, they say. And after months of parliamentary deadlock, Mr. Berlusconi has shown that he does not have the political backing to push through the measures that are required of Italy to remedy its financial ills.
Italy has been under the watchful eye of its European counterparts and international organizations since the summer, when the government pushed through two sets of austerity measures that financial markets nonetheless deemed insufficient to boost the country’s economy and make a dent in its huge public debt of 1.9 trillion euros. At 120 percent of gross domestic product, Italy’s debt level is second only to Greece’s in the euro zone.
Last month, Mr. Berlusconi pledged to the European Union that he would approve a new round of restructuring, including the privatization of state assets, liberalizations of the labor market and a modest pension change, but his promises did little to quell market anxieties. The borrowing cost on Italian bonds, the price that investors demand from Italy for loaning it money, have soared.
Even the decision taken at the Group of 20 Summit last week to allow the International Monetary Fund to monitor Italy’s implementation of the pledged reforms did little to boost investor confidence.
On Tuesday morning, opposition parties said they would abstain from the vote, which means that Mr. Berlusconi does not need to reach an absolute majority to pass the measure. But even so, the numbers will be closely watched to see whether Mr. Berlusconi has been able to muster a healthy majority that would ensure at least a measure of stability in the short-run.
President Giorgio Napolitano, who is constitutionally required to manage a political crisis, has a number of options open to him.
Mr. Berlusconi and his coalition allies are pressing for new elections, though recent polls indicate that they would not win the numbers to return to power.
Some opposition leaders, numerically empowered by the poll predictions, are also tempted by a return to the polls 18 months ahead of the scheduled end of the legislature.
But neither the current majority or any of the opposition parties are likely to garner a solid majority on their own, and it is probable that a multi-party coalition with conflicting vested interests would not have the political cohesion necessary to pass unpopular measures.
Another option is to appoint a technocrat – Mario Monti, a former European commissioner, is commonly mentioned – as head of the government for a fixed period of time that would allow for reforms to be enacted.
Despite the crisis, it remains to be seen whether a government led by someone such as Mr. Monti would actually come up with the unity to govern.
The country’s political crisis has been exacerbated by coalition partners in both the majority and the opposition that are openly hostile to Europe, remaining “at the margin of the European political network,” and making it more difficult to push through reforms demanded by Europe, said Sergio Fabbrini, Director of the School of Government at Rome-based LUISS University. In this situation, a changeover in government is unlikely to make much of a difference, he said…Read the full article
Major Media Headlines:
- The crisis in Europe prompts a tightening of bank lending in the U.S. (FT)- Media Digest
- Barnes & Noble (NYSE: BKS) launches a new version of its NOOK e-reader. (Reuters)- Media Digest
- Google’s (NASDAQ: GOOG) chairman says his company will not favor Motorola Mobility (NYSE: MMI) as its develops new software. (Reuters)- Media Digest
- New Census Bureau data shows 49 million people in the U.S. live in poverty. (Reuters)- Media Digest
- Italy’s sovereign debt interest rates rise sharply. (Reuters)- Media Digest
- Greece cannot decide on its new prime minister. (Reuters)- Media Digest
Oil Today:
Evidence of oil off Greenland coast
Find comes after drill last year indicated presence of natural gas Greenland has taken one step closer to an oil rush after Edinburgh-based Cairn Energy today announced it had found signs of hydrocarbons in two wells drilled there this summer….
Greenland has taken one step closer to an oil rush after Edinburgh-based Cairn Energy today announced it had found signs of hydrocarbons in two wells drilled there this summer.
The wells, drilled at a depth of nearly a kilometre about 200 km off the coast of the capital city of Nuuk, reportedly hit “reservoir quality sands” that could hold oil and gas deposits.
This is the second time in two years the company has found evidence of oil or natural gas.
Cairn drilled a total of five wells this summer, but the first three were abandoned after they showed no evidence of oil or gas.
According to the company, it found signs of oil and natural gas in mud that had been forced up through its test well.
The discovery of the hydrocarbons in a 50-metre thick layer of sand is significant, since it means that any oil or gas trapped there would easily be forced to the surface.
Cairn will now attempt to obtain fluid samples from the wells.
This was the second drilling season Cairn has been active off the coast of Greenland. Last year’s drills also returned evidence of natural gas. Cairn had initially expected to invest 5.5 billion kroner in its Greenlandic drilling activities through 2014, but as of this summer it had already reached that amount. The company, however, said it remained committed to the search for oil in Greenlandic waters.
Both this year and last Cairn was forced to temporarily halt its drilling when activists from Greenpeace borded drilling rigs. The company received a court order banning the organisation’s activists from approaching its vessels.
Studies show that the Arctic contains roughly 30 percent of the world’s unproven gas reserves and 10 percent of its unproven oil reserves…Read the full article
Weather Updates
There is a small tropical storm, Sean, out in the Atlantic moving towards Bermuda. There is no threat to the US at this time.
National Hurricane Center
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National Weather Conditions
The country has a variety of issues this week. There are winter storm warnings and watches around the Great Lakes and around the southern Rockies. Alaska is facing blizzards on its west coast that are causing havoc. In parts of California and Arizona there are freeze warnings.
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