Since the Cyprus intervention, the euro debt markets have exhibited remarkable calm, in spite of the precedent that was set. Italian and Spanish yields are both pushing back towards the lows, and it seems that stability has won out.
Let’s gloss over the inconvenient fact that Italy hasn’t had a government for, oh, seven weeks now. According to Italy’s debt, all is well in the land shaped like a boot.
Clearly, this is a contradiction. It’s a matter of if, not when, this thing blows up.
At some point, people are going to question exactly, what business do the remnants of Italy’s last government have in collecting taxes, or administering programs. Or issuing debt at all. How can a country with no government make its payments?
I know it’s all about the northeaster countries at this moment, dictating events and how they play out. But at some point, you have to question, what is “Italy”? Seven weeks without any government is kind of a big deal. And where does this get resolved?
Yet, here we find money flooding into the country-less bonds. Why? I’ve heard a few theories, but I’m not really interested in them. More importantly, at what point do the theories become a distraction from the problems?
And when the problems become front and center, what does that mean following everything that has happened up until now?