18/11/2013: Some cautiously decent news for Pharma sector?..

An interesting article from McKinsey on the drivers for rapid increase in the new drugs approvals by FDA: http://www.mckinsey.com/Insights/Public_Sector/Whats_driving_the_surge_in_new_drug_approvals?cid=other-eml-alt-mip-mck-oth-1311 with 39 new drugs approved in 2012 alone - the decade high. 2011-2012 approvals were 24% ahead of long-term average.

Good news for Ireland's number one goods-exporting sector, but several caveats in place:

• FDA approvals are accelerating both due to pipeline of new formulas, and on acceleration in late stage trials approvals. The former is driven by biophrama - with much less prevalent activity presence in Ireland, although we are aggressively competing for the sub-sector. 
• Pharma sector is still driven into lower costs operations - something not exactly favouring Ireland.
• Irish market access to the EU is becoming problematic due to cost cutting efforts of the European health systems.
• Approvals seem to be in new submissions, so less likely to generate blockbusters we need to replace to stay put in terms of pharma sector exports.

Still, to quote McKinsey: "We are cautiously optimistic that this development signals a turnaround in pharmaceutical R&D productivity"

18/11/2013: European Health: Cancer Survival Rates

Spot where our HSE comes compared to NHS...

Source: http://www.thecommentator.com/article/4359/if_polly_toynbee_cared_about_britons_health_she_d_campaign_to_scrap_the_nhs

Now see some other metrics: http://trueeconomics.blogspot.ie/2013/10/8102013-jokers-burning-money-public.html

Most detailed and most recent study of cancer rates: incidence and survival across Europe: http://www.iarc.fr/en/media-centre/iarcnews/pdf/Ferlay%20J_EJC_2013.pdf

17/11/2013: Irish Government Score Card 2013: OECD

Well-summarised insights from the OECD on Irish Government performance based on 2011-2012 data: http://www.oecd.org/gov/GAAG2013_CFS_IRE.pdf

Latest Government at a Glance page for all countries: http://www.oecd.org/gov/government-at-a-glance-information-by-country.htm

Note, to adjust for GDP/GNP gap in the case of Ireland, use roughly 20% gap (longer-term average).

17/11/2013: Ireland to Remain Subject to EU/ECB Oversight post-Exit

On may occasions I have stated that Ireland will remain subject of the enhanced supervision by the EU and ECB of its fiscal policies following our exit from the 'Troika bailout'.

Minister Noonan this week confirmed as much: http://www.irishexaminer.com/ireland/troika-to-keep-eye-on-ireland-for-20-years-249851.html

Here's the relevant legislation governing our required compliance:

Regulation (EU) No 472/2013 of the European Parliament and of the Council
of 21 May 2013
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32013R0472:EN:NOT
pdf link: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:140:0001:0010:EN:PDF

Emphasis in bold is mine:

Article 14: Post-programme surveillance

1. A Member State shall be under post-programme surveillance as long as a minimum of 75 % of the financial assistance received from one or several other Member States, the EFSM, the ESM or the EFSF has not been repaid. The Council, on a proposal from the Commission, may extend the duration of the post-programme surveillance in the event of a persistent risk to the financial stability or fiscal sustainability of the Member State concerned. The proposal from the Commission shall be deemed to be adopted by the Council unless the Council decides, by a qualified majority, to reject it within 10 days of the Commission's adoption thereof.

2. On a request from the Commission, a Member State under post-programme surveillance shall comply with the requirements under Article 3(3) of this Regulation and shall provide the information referred to in Article 10(3) of Regulation (EU) No 473/2013.

3. The Commission shall conduct, in liaison with the ECB, regular review missions in the Member State under post-programme surveillance to assess its economic, fiscal and financial situation. Every six months, it shall communicate its assessment to the competent committee of the European Parliament, to the EFC and to the parliament of the Member State concerned and shall assess, in particular, whether corrective measures are needed...

4. The Council, acting on a proposal from the Commission, may recommend to a Member State under post-programme surveillance to adopt corrective measures. The proposal from the Commission shall be deemed to be adopted by the Council unless the Council decides, by a qualified majority, to reject it within 10 days of the Commission's adoption thereof.

Note: you can track my analysis of the 'exit' announcements following the links posted here: http://trueeconomics.blogspot.ie/2013/11/15112013-beware-of-german-kfw-bearing.html

17/11/2013: Mortgage holders in difficulty to avail of new initiative from tomorrow: IMHO

Tomorrow, the new IMHO pilot programme for AIB/EBS/Haven clients in mortgages arrears and distress comes on line. Key points of contact: www.mortgageholders.ie or via 1 809 623 624.

The full press release on the initiative is available here:  https://www.mortgageholders.ie/blog/posts/mortgage-holders-in-difficulty-to-avail-of-new-initiative-from-tomorrow

All details on the initiative purpose and set up are available here:  http://trueeconomics.blogspot.ie/2013/11/5112013-my-op-ed-for-journalie-on.html


Note: to preclude any confusion or accusations against IMHO or myself: I do not provide frontline client-facing advise or services. I am a member of the board. Sadly, given past experiences with some commentators, I have to state this. 

16/11/2013: WLASze: Weekend Links on Arts, Sciences & zero economics

This is WLASze: Weekend Links on Arts, Sciences and zero economics. Enjoy!


In recent WLASze (http://trueeconomics.blogspot.ie/2013/11/2112013-wlasze-weekend-links-on-arts.html), I wrote about the IBM's Watson super computer pushing out the limits of AI by getting into the areas of 'computational creativity' - not quite human creativity, but still… Here's an MIT Technology Review take on the same http://www.technologyreview.com/view/521596/the-secret-ingredient-in-computational-creativity/

Ages ago I used to do some work trying to figure out what exactly Waston's capabilities can be used for (http://trueeconomics.blogspot.ie/2011/02/13022011-what-jeopardy-champ-can-do-in.html). As I found out, the bounds to computation are that computation is bounded - in other words, computational systems are still based on continued iterations of pre-set space of data. Computers lack the power of creation no matter how much power of combination is granted to them.

Thus, culinary exploits of a computer are fun and good, bye more important question, however, remains the same as before: what is creativity in the first place… The real breakthrough for the AI will arrive when computers start asking that, rather than answer reducible problems of matching traits to combinations of various substances.


Now, let me see… here's an example. "Legacy Machine N°1 was conceived when Maximilian Büsser started fantasising: "What would have happened if I had been born in 1867 instead of 1967? In the early 1900s the first wristwatches appear and I would want to create three-dimensional machines for the wrist, but there are no Grendizers, Star Wars or fighter jets for my inspiration. But I do have pocket watches, the Eiffel Tower and Jules Verne, so what might my 1911 machine look like? It has to be round and it has to be three-dimensional: Legacy Machine N°1 was my answer."" Take a look
http://www.mbandf.com/machines/legacy-machines/lm1/#/about

Of course, you might say that there is reductionism going on here: the author took specific time periods hallmarks and reduced them to physical design semiotics, to graphic and industrial markers. The issue, however, is that both the inputs and outputs were qualitative, not quantifiable, in their very nature. And as a result, translation from inputs to outputs required much more than an algorithmic search-and-match, but an aesthetic narrative, leap of faith, belief, discontinuity.


Non-reducibility of art follows across both the creative dimension and descriptive compositions. Example: John Pawson's minimal St Moritz Church photographed during a choir rehearsal:
http://www.dezeen.com/2013/11/15/st-moritz-church-john-pawson-photography-hufton-crow/

The point of this is that with true art, one does not really know where the creation ends or begins. One can have reference points or interpretative meanings assigned to work, but one cannot have re-traceable deterministic path from a work of art back to the points of data origination that inform that work. In the case of AI - one can and indeed the record of the pathway exists.


In mathematics, this goes to the heart of the nature of countability, infinity and infinite sets. Mathematics distinguishes different degrees of infinity - something unique to the subject. Artists inhabit the world that allows for them. Computers, however, are able to function only in the world with countably infinite systems in them. Here's a quick and dirty article on the difference in sizes of various infinite sets: http://www.scientificamerican.com/article.cfm?id=strange-but-true-infinity-comes-in-different-sizes and more entertaining version: http://www.newscientist.com/article/mg21128231.400-ultimate-logic-to-infinity-and-beyond.html#.UoeJ3JRHBF8

Let me add that if you extend the above argument to include power sets, then the set of possible infinities becomes infinite itself and the size of possible infinities becomes infinite.


Amazing beauty of juxtaposition: content vs context in Max Sher's photographs. See series Amerika:

Russian Palimpsest:

Your spring will never end:

I Will Drink To Your Decline:

See more at http://maxsher.com/work


How fast does the Earth rotate? Geeky answer to a child-like innocence of the question: http://imagine.gsfc.nasa.gov/docs/ask_astro/answers/970401c.html but someone, please tell NASA that designing a website can be… oh… so exciting… (as opposed to simply plugging text into a tabulated space presented like some sort of a proto-socialist elections leaflet asking you to support your only candidate choice from your only political party…


And just to keep track of the past propaganda the WLASze unleashed on you, here's a WSJ article on the Detroit revivalist design shop Shinola:
http://online.wsj.com/news/articles/SB10001424052702303618904579169660144850526
I love these guys and has covered them in WLASze: http://trueeconomics.blogspot.ie/2013/11/10122013-wlasze-weekend-links-on-arts.html What an awesome merger of design, tradition, and sentimental wealth of Detroit…


And another self-referential note. Readers of the WLASze know I have been critical of Banksy's foray into NYC with 'artist in residence' concept. I love, this, however: http://www.foodrepublic.com/2013/10/11/banksys-latest-nyc-art-installation-takes-aim-slau?utm_source=outbrain.com&utm_medium=partner&utm_campaign=CPC What an awesomely invasive push through the urban mindscape.

It's "Sirens of the Lambs"… pitch-perfect…

The latest in pre-apocalyptic disaster-state living schematise is upon us, courtesy of a student's warped (vino? or "…two bags of grass, seventy-five pellets of mescaline, five sheets of high powered blotter acid, a salt shaker half full of cocaine, and a whole galaxy of multi-colored uppers, downers, screamers, laughers... and also a quart of tequila, a quart of rum, a case of Budweiser, a pint of raw ether and two dozen amyls. Not that we needed all that for the trip, but once you get locked into a serious drug collection, the tendency is to push it as far as you can," as Hunter S. Thompson defined a perfect condition for tripping out of space) imagination and via Woldless Tech (the place where Big=Great and Invasive=Sensitive): http://wordlesstech.com/2013/11/07/amazing-eco-friendly-walking-metropolis/
"An amazing eco-friendly walking metropolis" that is actually non-amazing (beyond the scale) not eco-friendly non-metropolis:

But, to be fair to the WorldlessTech, they have some actual pearls: http://wordlesstech.com/2013/10/30/famous-logos-communist-regimes/. The humour is spot on most of the time…

This alone is worth coming back to the site…


And for the last bit… an absolutely stunning project via Bot & Dolly here: http://www.botndolly.com/box
A live performance exploring "the synthesis of real and digital space through projection-mapping onto moving surfaces". WATCH IT! From the Box to Levitation to Intersection to Teleportation to Escape…

Enjoy!

16/11/2013: Apple under fire in Italy... thanks to its Irish tax practices

More unpleasant tax news flows for Ireland: Italians continue their campaign against low tax payments by predominantly US MNCs. As I remarked before (here: http://trueeconomics.blogspot.ie/2013/11/14112013-with-banks-or-without-things.html) this is a misguided campaign based on fiscal desperation, but it does not bode well for us here in Ireland to see the country name being firmly linked with what our 'partners' in Europe are not exactly happy...
http://news.sky.com/story/1168449/apple-faces-italy-tax-fraud-inquiry

You can track series of links on the subject of Ireland's corporate tax systems starting from here: http://trueeconomics.blogspot.ie/2013/10/28102013-back-in-news-double-irish.html

15/11/2013: Beware of German (KfW) Bearing Gifts?..

As reported in today's press, Ireland has secured a sort-of backstop to its exit from the bailout via an agreement with Germany's state- and local authorities-owned KFW Development Bank (see: http://www.irishtimes.com/news/politics/kfw-is-a-public-bank-providing-development-loans-at-lower-interest-than-commercial-rates-1.1595460 and http://www.irishexaminer.com/ireland/bailout-a-calculated-political-gamble-that-just-might-not-pay-off-249727.html). This was blessed by Germany (http://www.independent.ie/business/irish/merkel-backs-ireland-bailout-exit-without-overdraft-29754656.html). And it may or may not qualify as a backstop for the Exchequer (see speculative analysis here: http://www.irishexaminer.com/archives/2013/1115/ireland/bailout-exit-declaration-exaggerated-half-truth-249716.html).

One can only speculate as to the possible conditionalities imposed by Angela Merkel and her potential coalition partners on Ireland under the exit deal, but here's an interesting parallel development that has been unfolding in recent weeks.

Per reports (see for example this: http://uk.reuters.com/article/2013/11/14/uk-eu-banks-idUKBRE9AD0X820131114 and this: http://uk.reuters.com/article/2013/11/15/uk-eurozone-banks-backstops-idUKBRE9AE08G20131115 and this: http://uk.reuters.com/article/2013/11/14/uk-ww-eu-banks-idUKBRE9AD15520131114 and this: http://www.irishtimes.com/business/economy/spd-rules-out-deal-on-banks-legacy-debt-1.1595352 and this: http://www.euractiv.com/euro-finance/germany-opposes-rescuing-ailing-news-531713):

1. Germany is clearly stating and re-stating its position on use of EU funds to recapitalise the banks (forward from the stress tests to be conducted). The position is 'No Way!' Wolfgang Schauble is on the record here saying "The German legal position rules out [direct bank recapitalisation from the ESM, the eurozone bailout fund,] now…That's well known. I don't know if everyone has registered that." So it is 'No! No Way! I said so many times!' stuff.
2. Euro area Fin Mins are moving toward using national (as opposed to European) funds to plug any banks deficits to be uncovered in the stress tests.
3. SPD Budget Spokesperson clearly states that his party is firmly, comprehensively against use of euro area bailout funds to retrospectively recap banks (the seismic deal of June 2012 is, in their view, not even a tiny wavelet in the tea cup).

Now, Ireland is the only country seeking retrospective recap and it is bound to have come up in the Government talks with Germans and the Troika in relation to bailout exit.

Put one and one together and you get a sinking feeling that may be retrospective recaps were the victim of the Government 'unconditional' solo flight from the Troika with KfW sweetener to comfort the pain of EUR64 billion in possible retroactive aid in play?..

Note: I am speculating here. It might be just that the Germans (KfW) decided to simply recycle their trade surpluses into another property err... investment bubble inflation in the peripheral states cause they just were so delighted with the way we paid off their bondholders. Or it might be because they are keen on burning some spare cash. Or both. Or none. If the latter, the reasons might be that it bought them cheaply something they want... How about that retroactive banks debt deal? It's pretty damn clear they want that off the table, right?

You can read my analysis of the exit here: http://trueeconomics.blogspot.ie/2013/11/15112013-exiting-bailout-alone-goods.html and see Ireland's credit risk score card here: http://trueeconomics.blogspot.ie/2013/11/15112013-ireland-some-credit-risk.html and fiscal risk assessment here: http://trueeconomics.blogspot.ie/2013/11/15112013-primary-balances-government.html.

15/11/2013: Primary Balances: Government Deficit Risks

While looking at Ireland's risk dynamics relating to our exit from the Bailout (covered here:  http://trueeconomics.blogspot.ie/2013/11/15112013-ireland-some-credit-risk.html) it is useful to think about the Government deficits ex-interest payments on debt. Here are the latest projections from the IMF:

For now, Ireland is running behind Portugal. By end of 2014, we are expected to overtake Portugal, but thereafter we are expected to remain behind Italy and Greece.

Not exactly a risk-free sailing there for the so-called 'best student in class'... Still, we are heading to posting our first crisis-period primary surplus.

15/11/2013: Ireland: Some Credit Risk Analytics

Just as I covered some of my thoughts on Irish exit from the bailout (http://trueeconomics.blogspot.ie/2013/11/15112013-exiting-bailout-alone-goods.html), the Euromoney Country Risk group published a neat summary of risk ratings for Euro area sovereigns. Here it is:

Ireland is still in a relatively weak position - not as bad as the 'periphery', but not as good as we should be...

And with a bit more granularity:

15/11/2013: Exiting the Bailout Alone: 'Goods', 'Bads' and Risks

So Ireland is exiting the bailout without a precautionary line of credit. The news is big. And the news is small.

Small on positives, albeit tangible:

1. Markets got more certainty that any pricing will be a signal - absent a back stop, pricing signalled by the bonds markets is more likely to be the true pricing of debt. Caveat: NTMA's EUR 20 billion+ credit pile-up is likely to still muddle the waters. At last for a while, we are pre-funded.
2. The markets were told by the Government that, like the FF/GP Coalition before them, the current shower can make statements. Whether they can live up to them (see 'bad' points below) is another game.
3. We avoided the unknown to us 'conditionalities' that attached to the pre-cautionary line of credit - be it Precautionary Conditioned Credit Line (PCCL) or the more strict Enhanced Conditions Credit Line (ECCL) (see points below as to the cost of this avoidance).
4. IMF will be gone from the Government Buildings (although it still will be monitoring our performance from the sidelines with bi-annual reviews and the EU 'partners' will still be visiting the Merrion Street).

Small and potentially large negatives, many not yet tangible:

1. Reforms reversals pressures are bound to set in: with elections coming up, trade unions and other lobbyists (yes, that's right - the all are lobbyists) will be pressuring the Government to cut back on 'austerity'. In other words, we are going to see the return of the 'Galway Races' in a slightly less in-your-face form. Taxpayers be warned - fiscal discipline can start drifting even more toward tax extraction away from spending cuts.
2. Reforms fatigue is likely to follow: Irish Government to-date has failed to deal forcefully with the issues of domestic reforms. Interest groups and powerful vested interests they represent are lining up on the starting line to make sure they will continue extract protection from the State in exercising their market power. Consumers be warned - semi-states and protected professions will continue ripping us off.
3. Risks to the fiscal, financial sector and macroeconomic conditions are not going away. Just spot the decline in our goods exports: January-September cumulative exports are down from EUR70.12 billion to EUR65.41 billion year on year. The timing for our exit is fine, but the risks are still there.
4. Creeping up of the longer-term borrowing rates can take place, both in-line with expectations for the future rates policy by the ECB and in pricing in any risks to the macro and fiscal sides.
5. Stepping outside the tent with Troika reduces the pressure that the IMF can apply on our 'partners' in supporting any retrospective banks debt deal.
6. IMF leaving the oversight system (the latter won't go away per 2-6 packs legislation we have signed up to) means we are seeing the back of our only 'protector' in the Troika. Good luck expecting the EU and ECB taking the side of the Irish economy on fiscal and structural reforms policies.
7. Having exited without PCCL or ECCL, we do not qualify for the OMT - the famed and fabled 'silver bullet' from the ECB that was supposed to act as the fail-proof measure for risk management and crisis blowout prevention.

What can we - consumers and taxpayers - expect (these are uncertainty-laden assessments, based on current track record of the Government and internal coalition politics, so they are subject to possible change):

1. Higher costs of semi-states' services to ordinary punters as the protected sectors remain protected and are used increasingly to shore up public finances;
2. Higher costs of financial services as banks ramp up their power vis-a-vis the Government;
3. Higher taxes and charges as reforms policy drifts lifelessly from spending cuts to revenue raising;
4. Higher cost of debt roll-overs in the longer run as markets price in fully the level of debt we carry;
5. Lower competitiveness in the long run and more reliance on the old favourites (property, Government spending and consumption) to drive growth.

May we have good luck avoiding the above 'bads' and risks and enjoying the above 'goods'...

Update: The best headline of the affair award goes to Bloomberg: http://www.bloomberg.com/news/2013-11-15/irish-go-commando-as-noonan-draws-line-under-crisis-euro-credit.html

14/11/2013: With banks or without, things are heading for desperate in Italy...

The banks stress tests are coming up and the Euro periphery system is quickly attempting to patch up the massive cracks in the facade. The key one is the continued over-reliance of banks on sovereign-monetary-banking loop of cross-contagion. The banking system weakness is exemplified by Italy: Italian banks are the main buyers of Italian sovereign debt, which in turn means that Italian government stability rests on the banks ability to sustain purchasing, which implies that the ECB (with an interest of shoring up Italian economy) is tied into continuing to provide cheap funding necessary for the Italian banks to sustain purchasing of Italian Government debt… and so on.

Three key facts are clouding this 'stability in contagion' picture:

1. Banks in Italy and elsewhere are not deleveraging fast enough to allow them repay in full the LTROs coming due January and February 2015;
2. Banks in Italy are now fully saturated with italian Government debt, posing threats to future supply of Italian bonds and putting into question the robustness of the banking stress tests; and
3. Italian Government is running out of room to continue rolling over its massive debts.

If all 3 risks play out at the same time or close to each other, things will get testy for the Euro.


Point 1: Banks in the euro zone continue to carry assets that amount to three times the size of the euro area economy. This puts into question the core pillar of banking sector 'reforms' that the ECB needs to see before the banking union (BU) comes into being. The ECB needs to have clarity on quality of assets held by banks and, critically, needs to see robust deleveraging by the banks before th BU can be launched. If either one of these conditions is not fully met, the ECB will be taking over the banking system that is loaded with unknown and unpriced risks.

Per recent ECB data, Banks in the euro zone held EUR29.5 trillion in total assets by the end of 2012. That is down 12% on 2008. Too slow of a pace for a structural deleveraging. Worse, the bulk of the adjustments was back in 2009 and little was done since. Which makes the level of assets problem worse: on top of having too many assets, the system has virtually stopped the process of deleveraging. Knock on effect is that the firming of asset markets in Europe in recent two years was supported by a slowdown in assets disposals by the banks. In turn, this second order effect means that many banks assets on the books are superficially overvalued due to their withholding from the market. Nasty, pesky first and second order effects here.

Worse. Pressure on assets side is not limited to the 'periphery'. German banks held EUR7.6 trillion in total assets at the end of 2012, followed by the French banks with EUR6.8 trillion. Spain and Italy's banking sectors came in distant second and third, with EUR3.9 trillion and EUR2.9 trillion in total assets.

Capital ratios are up to the median Tier 1 ratio rising from 8% in 2008 to 12.7% in 2012. Quality of this capital is, however, subject to the above first and second order effects too - no one knows how much of the equity valuation uplift experienced by the euro area banks in recent months is due to banks reducing the pace of assets deleveraging…


Point 2: Assets quality in some large banking systems is too closely linked to the sovereign bonds markets. Italy is case in point. ECB tests are set to exclude sovereign debt risk exposures, explicitly continuing to price as risk-free sovereign bonds of the peripheral euro area states. But in return for this, the ECB might look into gradually forcing the banks to limit their holdings of sovereign bonds. This would be bad news for Italian banks and the Italian treasury.

The problem starts with a realisation that Italian banks are now primarily a vehicle for rolling over Government debt. Italy's Government debt is over EUR2 trillion. EUR397 billion of that is held by Italian banks. Another EUR200-250 billion can be safely assumed to be held by Italian banks customers who also have borrowings from these banks. Any pressure on the Italian sovereign and the ca EUR600 billion of Italian debt sloshing within the banking system of Italy is at risk.  That puts 20.7 percent of Italian banks assets at a risk play. [Note: by some estimates, Italian banks directly hold around 22% of the total Italian Government debt - close to the above figure of EUR397 billion, but way off compared to Spanish banks which are estimated to be holding 39% of the Spanish Government debt, hence all of the arguments raised in respect of Italy herein also apply to Spain. A mitigating issue for Spain is that it's debt levels are roughly half those of Italy. An exacerbating issue for Spain is that its deficit is second highest in Europe, well ahead of Italain deficit which is relatively benign).

Worse, pressure cooker is now full and been on a boiler for some time. In the wake of LTROs, Italy's banks loaded up on higher-yielding Italian Government debt funded by cheap LTRO funds - Italian banks took EUR255 billion in LTROs funds. In August 2013, Italian banks exposure to Italian Government debt hit EUR397 billion, just shy of the record EUR402 billion in June and double on 2011 levels. I

Either way, with or without explicit ECB pressure, Italian banks have run out of the road to keep purchasing Italian Government debt. Which presents a wee-bit of a problem: Italy needs to raise EUR65 billion in new debt in 2014. Italy is now in the grip of the worst recession since WWII and its debts are rising once again.

Chart below shows that:
1) Italian Sovereign exposures to external lenders declined in the wake of the LTROs, but are back to rising in recent quarters;
2) Italian banks reliance on foreign funding rose during the LTROs period, declined thereafter and is now again rising; while
3) Other (non-financial and non-state) sectors remain leveraged at the levels consistent with late 2006.

Point 3: Overall, Italian Treasury is now competing head on with the banks for foreign lenders cash and Italian corporate sector is being forced to borrow abroad in absence of domestic credit supply. Foreign investors bought almost 2/3rds of the last issue of Italian bonds, but how much of this appetite can be sustained into the future is an open question. Foreign investors currently hold slightly over a third of Italy's debt, or EUR690 billion, down from more than EUR800 billion back in 2011. The Italian Government is now turning to Italian households to mop up the rising supply. Italy issued EUR44 billion worth of inflation-linked BTP Italia bonds with 4 year maturity. As long as inflation stays low, the Government is in the money on these.

Next in line - desperate measures to raise revenues. Per recent reports, there is a proposal working its way through legislative corridors of power to raise tax on multinational on-line companies trading in Italy. The likes of Google, Amazon and Yahoo will be hit with a restriction on advertisers to transact only with on-line companies tax-resident in Italy, per bill tabled by the center-left Democratic Party (PD). The authors estimate EUR1 billion annual yield to the state - a tiny drop in the ocean of Italian government finances, but also a sign of desperation.