Photo: Nihnih, Wikimedia Commons
Berlusconi is gone. No doubt, world leaders across Europe are busting open the prosecco, cheering alongside the people on the streets of Italy.But of course there’s no great reason to think that the next PM of Italy (likely Mario Monti) will be much better at enacting reforms, or that any said reforms will keep the bond wolves at bay.
No, what we’re going to be watching on Monday is whether the ECB — lead of course by Italian Mario Draghi — will seriously jump into the market and suppress Italian yields. We’re not talking about a bond buying program, we’re talking about explicit yield suppression.
Now with Silvio gone, that theory will be put to the test.
If the ECB gets in, it will be the first game-changer of the whole crisis. If the ECB waits it out, or only nibbles on some more Italian debt, it might even be worse than the status quo, since it will confirm that even with major changes in leadership, the ECB just doesn’t want to do its part.