The Milan Stock Exchange tries to hold on. And for some time in the morning (until the five-year BTP auction) it moved in positive territory, outperforming the other European Stock Exchanges (in negative territory). The start of the session was marked by the new move by the Moody's rating agency which placed the United States rating under observation. The situation remains uncertain. Doubts remain: after two consecutive rising sessions, has the speculative attack on Italy deflated? Has the perception of operators towards Piazza Affari changed?
"The market is volatile, few trades both when it rises and when it falls", says Carlo Gentili, one of the founding partners of the management company Nextam Partners, who however rejects the idea that there is talk of speculation to explain the collapse on the Italy: “I don't know the meaning of the word speculation – he says – all those who enter the market do it to make money. A counterparty that behaves in a certain way, such as the political class for example, causes investors to behave in a certain way.
And everyone is scared, from myself to the hedge fund, to the English pension fund. There's a lot of selling pressure. But short selling is riskier than buying, whoever takes the risk of short selling BTPs has assessed the situation and takes responsibility and then it is clear that there is room to make a profit. Where is the problem?". Yes, up until Tuesday the market perceived that it had the possibility of making money by selling Italy. Then the perception has partly changed. "The political class has taken on greater responsibility, the maneuver has been strengthened and Ecofin has taken action".
But the recovery of these days still remains guided fundamentally by technical reasons: “Traders covered themselves, both because they had already earned, and because they saw a reaction from Italy and Europe and decided to close their positions before the market eventually restarts". But more is needed to definitively change the markets' opinions: it is no coincidence that the spread on the 2014-year bund has narrowed but has remained at levels above the pre-crisis levels. The original sins of the maneuver for Gentili remain two: “the postponement of the accounts to XNUMX is a joke, the cuts are postponed when the government is no longer there.
If you want to do it, you have to do it now. Then there is the issue of women's pensions: it would be a structural reform if completion were expected by 2020 and not 2034”. Of course, the market likes the privatizations introduced with the strengthening of the maneuver. “A state that is still so rich is annoying especially when it comes to assets”, comments Gentili. They help, but they don't make a difference now. Also for Patrizio Pazzaglia, investment manager of Bank Insinger in Beaufort, the main node for radically changing the perception that the international markets have of us is above all pensions.
“The thing that the market would like most – explains Pazza glia – is if the process of approaching the retirement age were accelerated. These are the interventions that the market likes, which must be incisive and not one-off. Of course, privatizations and liberalizations are welcome and strategically correct, but the effect is not immediate and a credible program is needed. It will be necessary to see which companies and how, which is why the predominant scenario should be that of structural reforms such as pensions".
Which has social implications that are difficult to ignore. Here, in the new version that is about to be approved, four amendments have emerged in the field of social security: a slight easing of the tightening of the mechanism that adjusts the amount to the cost of living with the revaluation increased to 70% for pensions between 1.400 and 2.300 euros , resetting it beyond this threshold; but at the same time the advance to 2013 from 2014 of the start of the update of the exit windows, the postponement for those who have accrued 40 years of contributions in 2012 by one month, by two for those who arrive in 2013 and by three in 2014 and a trap on golden pensions with a solidarity contribution of 5% on treatments of 90 euros and over and 10% over 150.
In any case, mind you, rigor pays off. The markets appreciated the strengthening of the manoeuvre. However, it is clear that the better performance compared to the European stock exchanges depends on technical factors: Milan recovered more because it was undermined by the banks who are now leading the rebound. "I would define it as a technical recovery for the moment - says Pazzaglia - for a more continuous movement, the approval of Friday's maneuver and content oriented towards rigor will be decisive." However, Italy remains under special surveillance. “It was and is even more so than before”, comments Raimondo Marcialis, general manager of Mc Gestioni Sgr.
"It represents a great opportunity for traders and hedge funds to earn: it is easy to blame Italy for its debt and at the same time there is a very liquid stock and government bond market" He adds: "These days the market he was not convinced by the maneuver which is not exhaustive but by the fact that Italy is more reactive: he has shown that if the situation gets worse it would be able to find answers”. The calm on the markets could therefore be apparent. “Prices have normalized – continues Marcialis – and tensions have eased, but that doesn't mean that government bond spreads will shrink as before the crisis. We are in a situation of volatility and the risk of possible speculation remains”.
In fact, the increase in spreads triggers a vicious circle made up of lower investments and lower growth: structural problems that must be stemmed by structural responses. “Privatisations and liberalizations are positive – Marcialis says – but the fear is that they won't be able to do it. Serious planning is required and not just responding to emergencies. The very strengthening of the maneuver means that we are responding to emergencies and that we are not planning. A limitation that always makes us a fragile country”.
But this does not mean that Italy will not be able to meet its commitments, even if it will have to sell the family jewels. On the contrary. On closer inspection, a BTP is much better than a Bund. “We are increasing our positions on government bonds these days – says Marcialia – the bubble more than in Italy is in Germany, the USA and England who pay interest on ten-year bonds that are too low and the risk in the future is that of capital account losses. The relationship that exists between Pigs and the rates of these economies is not balanced”.
