Yields on Italian 10-year bonds hit a post-EMU high of 5.3pc on Friday. This is not just a theoretical price: the Italian treasury has to roll over €69bn (£61bn) in August and September; it must tap the markets for €500bn before the end of 2013. The interest burden on Italy’s €1.84 trillion stock of public debt is about to rise very fast.
Spanish yields punched even higher, through the danger line of 5.7pc.
French banks alone have $472bn (£394bn) of exposure to Italy and $175bn to Spain, according to the Bank for International Settlements.
Italy’s premier Silvio Berlusconi has chosen this moment of acute danger to undermine his own finance minister, Giulio Tremonti, the one figure in his cabinet respected by global bond vigilantes. “He’s not a team player, and thinks he’s genius and that everybody else is a cretin,” said Mr Berlusconi.
Meanwhile, Mr Tremonti is living free in the Rome house of a political ally just arrested on corruption charges….”The government ceased to exist months ago,” wrote Massimo Giannini in La Repubblica.
The eurozone’s M1 money supply has contracted on a month-to-month basis over the past two months, with sharper declines in the periphery.
The PMI data for Italy and Spain have dropped below the recession line. The Goldman Sachs global PMI indicator shows that 80pc of the world is tipping into a slowdown, including India and China.
The calamitous US jobs data released last Friday leave no doubt that the US remains trapped in depression. Broad U6 unemployment rose from 15.8 to 16.2pc in June; the numbers in work fell by a quarter million to 153.4m; the average time without a job reached a fresh record of 39.8 weeks; hourly pay fell; hours worked fell; the employment/population ratio crashed to new lows of 58.2pc.