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๐ฎ๐น Promising ยซblack swanยป: Italian recipe
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Analysts are discussing the war in the Middle East, the collapse in the UST market and the next American shutdown, but a fresh global problem is quietly and imperceptibly approaching us: the debt crisis in Europe. And Italy became the weakest link in this process.
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Life has once again proven that sorting the terms does not change the final sum: changing the ruling party does not guarantee an improvement in the economy. The slogans ensured the centre-right's victory in the elections but did not bring the country any closer to solving the problems of the budget deficit.
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Let us remind you: monetary policy in the EU is the responsibility of ECB, but fiscal policy is each countryโs own headache.
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It is already clear that the new Prime Minister Giorgia Meloni has set her priorities poorly โ instead of tightening fiscal policy to replenish the treasury, she, fearing public protests, decided to soften it.
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The yield on Italian 10-year bonds has already risen 9% to almost 5% for the first time (compared to the European average of 2.894%). Italy's debt-to-GDP ratio is around 140%. A sharp increase in spending not only worsens the deficit situation but also reduces the country's creditworthiness.
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But the trouble is that next year Italy will need to refinance old and finance new debts in the amount of 24% of GDP, and all this will be calculated at higher rates. However, interest on debt is growing much faster than nominal GDP, so the situation looks extremely unstable.
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The debt crisis in Europe could trigger panic sales in the stock market. Investors will begin to sell debt securities of Greece and Portugal, and due to high inflation (4.3%), ECB is extremely limited in its actions.The return of
EuroQE will not only hit European currency but will also lead to higher prices. And then ECB will have to raise rates again. But where to go next??
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Profits to yโall!