Italy Requests a ‘Semi-Bailout’ from ECB or ESM

Reuters is reporting that Italy  will push this week for a semi-automatic mechanism involving the ECB or the ESM (bailout fund) to reduce the spreads of its bonds over Germany’s.
Zerohedge points out (quite rightly) that the market is likely to take Italy’s request of a semi-bailout of its bond rates about the same as a packed amphitheater takes someone screaming ‘fire’ hysterically.

Que contagion.

Tyler Durden’s thoughts on the issue:

That Italy is now at most days away from technical insolvency is not news: after all we reported on just this a week ago, citing not some fringe lunatics but Bloomberg economist David Powell who said that “Italy would probably be forced into receiving a bailout if it were to face another two weeks like the last seven days.” This was a week ago… so one more week left, and things have not only not gotten better, they have gotten much worse. Which is why we were not very surprised to read the following just released news from Reuters: “Italy will push this week at a meeting of euro zone finance ministers for a semi-automatic mechanism involving the European Central Bank or the permanent bailout fund ESM to reduce spreads of euro zone bonds over Germany, Italy’s European Affairs Minister Enzo Moavero said on Monday.”

Having done this for a while, we can tell Italy what the bond market, having perused the above sentence, just read: “semi-bailout.” Because if Italy is implicitly demanding assistance from the ECB, and the Spanish bailout vehicle, the ESM, then things are about to hit the country with the €1.25 trillion in debt. It is all downhill from there. Oh, and here is what the bond market reads when they see ESM: “not so semi-subordination.” Because if in Europe the idiotic plan to avoid a bank run is to announce preparations for one, followed by furious back pedaling, it is only logical (and we use the term loosely) that an attempt to avert a bailout will be pursued by requesting a semi version. Instead, that action always and only leads to one thing: waving the sellers right in.
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