Monday, April 16, 2012

16/4/2012: Italian debt is going up, not down

John Langdon Down - a descendant of an Irishman and a British psychiatrist was, reportedly, the first person to use the French term 'idiot savant' to describe a specific condition in which a brain injury can lead to a person with 'developmental delays' of the brain is being able to demonstrate "profound and prodigious capacities and/or abilities in excess of those considered normal". I am no psychiatrist, but the cheerful reports with today's news that Italian Government debt has declined month on month in February were met suggests to me a manifestation of the similar nature.

Here are the facts. Italian public debt is down €6.8bn in February to €1,928 billion - a drop of 0.35% month-on-month. With a borrowing requirement down €1.4bn yoy in February, but flat at €12.7bn for two months January-February, compared to 12mos ago. It is the latter part - the static nature of Government borrowing requirements, not the former part - the reduction in debt, that matters most. The reason is simple - see charts below:

You see, in January-February 2011, tax receipts were €56,370mln, against €53,940mln in Government expenditure, yielding 2mos cumulated balance surplus of €5,072mln. In 2012, same period tax receipts were €55,931mln or €439mln below 2011 figures, with Government spending at €54,290mln or €350mln ahead of same period last year. January-February 2012 Government balance was in surplus €5,302mln. So the debt 'repayments' are not a sign of any improvement in the fiscal dynamics.

Now, there is a bit more to consider here, folks. The stated reduction in the Government debt is month-on-month and the statement above syas nothing about year-on-year comparison. Ok, so let's take Table 10 from April 16th Banca d'Italia data release. Column 1... errr... General Government Debt:
February 2011 at €1,875,010 mln, against February 2012 at €1,928,211 mln. Contrary to the cheerful view of 'debt falling €6.8bn', Italian debt went up year on year €53,201mln.

1 comment:

knucklesthedog said...

Constantine......Look closely for the smoking gun. Germany are concealing 1 trillion in toxic debt in their banks. Its made up of rotten subprime and credit default swaps (the loosing counter revealed by Michael Lewis in the big short) not to mention some Greek bonds for good measure . Deutsche bank insolvent. All hidden in holding banks in the US and off balance sheet .....for now. Outrageous stuff when one considers their fiscal piety to other nations.