"In both cases we had entities
that were wholly reliant on capital markets
for their funding needs.
...Once confidence is lost, it can be difficult to restore it.
In the case of Italy, it has over $500 billion of maturing debt
to roll over in the next two years
and $800 billion through 2014.
Doing so at current near-7% yield levels
will deal a punishing blow to debt- service costs
and make it next to impossible to meet ...fiscal targets
...rendering this a classic Catch-22 situation.
The difference is Lamhen had $150 billion in bonds outstanding
while Italy has $2.5 trillion.
...unlike Greece, Italy is just too big to rescue.
And it can't print money to cover its debts
and has no ability to devalue its currency
to bolster competitiveness and export receipts.
The magnitude of the financing requirement is such
that Italy is going to have to hold bond auctions
just about every week for as long as the eye can see,
and the odds of having them fail are not trivial.
It is hard to believe that Italy
will ultimately escape a restructuring of its own.
...global policy makers this time around
have far fewer bullets in the chamber
to deal with the situation as they did in late-2008/early-2009.
The Germans ...have good reason to recall 1923
and everything that followed.
This is something that people outside of Germany
simply do not understand
— the scars are felt more deeply there
and they will not choose to monetize the debts.
The ECB knows better than that too...