Italy’s Capital Flight
When it comes to refinancing Italy, bond purchases are just the tip of the iceberg: in August alone, Italy’s central bank drew €40 billion in credit from the ECB system, and it probably drew roughly another €50 billion in September. This is not the end of the world – not even for the ECB – but the eurozone has entered dangerous territory.
MUNICH – In August, the European balance-of-payments crisis moved beyond the Eurozone’s periphery and began buffeting Italy. Interest spreads for Italian government bonds began to rise, Prime Minister Silvio Berlusconi’s administration was alarmed enough to implement an austerity program, and the European Central Bank helped with extra liquidity.