12-18-2017, 12:04 PM
HSBC has warned clients that Italy’s economic recovery is weaker than it looks and the country risks a serious funding shock when the European Central Bank slashes purchases of Italian debt. Quantitative easing by the ECB has worked wonders for Italy’s apparent fiscal health. It has mopped up half the gross supply of Italian debt, shaving at least 100 basis points off Rome’s borrowing costs. But it has not changed the country's underlying pathologies. “The end of QE poses a threat to Italy. As the ECB pulls back, it will have to find new marginal buyers of its sovereign bonds. This might not be easy,” said Fabio Balboni, HSBC’s Europe Economist and a former trouble-shooter during the eurozone debt crisis for the UK Treasury. The country must refinance debt worth 17pc of GDP next year – one of the highest ratios in the world – yet there are no obvious buyers to step into the breach. Italian...
Italy risks storm as QE ends and politics go haywire, HSBC warns