Italy: Too Big to Save?

Published on
July 30th, 2020
42 minutes

Italy: Too Big to Save?

The Expert View ·
Featuring Pietro Ventani

Published on: July 30th, 2020 • Duration: 42 minutes

Pietro Ventani of App Advisors joins Real Vision to break down Italy's sovereign debt dilemma. Ventani argues that the magnitude of Italy's sovereign debt was close to a breaking point before COVID-19, and the pandemic was the straw that broke the camel’s back. Pietro explains the big decision the policymakers in Italy have to make - whether to restructure that debt in Euros or Liras. He presents the pros and cons of each restructuring option and explains why the new EU recovery fund does not match Italy’s needs. He provides indicators that will signal the direction of Italy's decision. Filmed July 27, 2020.



  • NS
    Niels S.
    6 August 2020 @ 07:59
    Why is the option of a default and remaining in the Euro (like Greece) not discussed? We can argue about the probability of various scenarios, but I think we cannot exclude this option. On a separate note, the problem of banks needing capital injections in such a situation can be dealt with through bail in.
  • SP
    Sat P.
    30 July 2020 @ 10:51
    Not a single mention anywhere that Italy and all EU countries need to slash taxes and welfare and create Special Economic Zones so that businesses will be falling over themselves to invest in the country. That's how Hong Kong and Singapore got rich. The secret has been out there for decades.
    • PV
      P V.
      30 July 2020 @ 11:17
      You are 100% correct but sadly the current state of populist political rhetoric makes the ideal of fiscal tightening politically toxic. In Italy there is no political party that is getting even close to the idea of raising taxes or reducing expenses. Currency devaluation is the path of least resistance.
    • HV
      Henrik V.
      30 July 2020 @ 13:09
      So what works for a small satellite country, works for the dominant block on the continent? Based on his description it seems quite clear; 1. Strengthen rule of law, and make it trusted and known by every citizen 2. Create a great environment for small business. So create a good environment for small banks to do local lending and make regulation efficient and effective
    • LS
      Lemony S.
      31 July 2020 @ 17:10
      Large nation states are historically an aberration, precisely for reasons we are seeing right now. Multicultural conglomerates can only make it with a common religion, and likely with an Emperor (like the Eastern Roman Empire). Voting rights have to be for those with skin in the game (select few). Notice that leftism/marxism/progressivism is completely opposed to this, which is why it works, by definition (leftism = 100% failure rate). Singapore knows all of these, and is lucky with its smaller size, but even its enlightened leaders knew that strict rule of law is the only way for things to be truly harmonious, and of course free markets where prosperity can reign. In these same societies you will see men act like men, and women like women - as they should.
    • ST
      Simon T.
      4 August 2020 @ 02:04
      There is Switzerland, Luxemburg, Ireland and the Netherlands which are Europe’s Singapore & HK.
  • CB
    Chris B.
    2 August 2020 @ 22:14
    RV, thank you for this interview. There is so much Fed-bashing in the various news channels, it was nice to have someone from the Fed on to address some of the issues and talk about Fed policy. David, thank you as well for coming on RV to face a community with a wide range of views on this topic. I enjoyed the exchange and found it educational. My conclusion from this is the same as after listening to Stephanie Kelton; and don’t consider this Fed bashing. That is, no matter which party is in power, or the distribution (Democrats own Congress and Presidency or the other way around), the era of government spending with no limits is upon us (pandemic or no pandemic). This approach will be given air cover via the statement of “socially and economically responsible government spending” and “debt doesn’t matter….”. So, the Howard Marks experiment will be tested; give each American $1 million or $300 trillion in total and see if this triggers inflation. I’ll say it again, ladies and gentlemen, prepare your portfolios!
  • CF
    Cristina F.
    2 August 2020 @ 20:53
    And why can’t ECB financing be done in perpetuity? Why not become Japan?
  • JF
    John F.
    30 July 2020 @ 12:08
    Needs close captions.
    • JT
      Jayne T.
      31 July 2020 @ 22:02
      There is a transcript which might be helpful.
  • JT
    Jayne T.
    31 July 2020 @ 21:59
    Italy has a huge underground economy (due to high taxes) which is not taken into account into many statistics.
  • DF
    Dan F.
    31 July 2020 @ 13:23
    Why not have the ECB run a QE program involving gold? They announce open market purchases of gold at a price high enough that Italy or any other country could settle target2 imbalances with newly revalued gold. Why couldn't that mechanism be used if there is a needed recapitalization of European banks by home country central banks? In terms of what that does to the Euro, the Euro is essentially backed by gold anyway - I believe it's their biggest reserve asset and unlike the US is marked to market quarterly. . Plus under Basel 3 gold is a tier 1 asset for commercial banks. Wouldn't a higher gold price be good for them?
  • MM
    Mark M.
    30 July 2020 @ 05:55
    These breakdowns from locals in their Euro markets is priceless... Would love to see a breakdown for each of the individual Euro zone countries from a local source. Great info. Loved it.
    • DF
      Diamantino F.
      31 July 2020 @ 08:05
      Mike the Euro rises at a faster pace than EM currencies to the dollar in my mind that is Euro strength not dollar weakness,
  • MC
    Michael C.
    31 July 2020 @ 01:59
    Molto bene, grazie
  • SF
    Stefano F.
    30 July 2020 @ 13:43
    realvision continues to have quite negative narrative on Europe.. even if problems are clear .. in the last 6 months the progresses have been evident for those who want to see them (end of positive fiscal budget in Germany and start of a common debt at european level).. a more neutral coverage could be a plus..the risk is to invest looking backward..
    • BS
      Boris S.
      30 July 2020 @ 14:15
      I think over last months I've seen plenty of EU outperformance interviews
    • DS
      David S.
      30 July 2020 @ 20:44
      Stefano F. - I always was a firm believer in the EU, but never a believer in the Euro. The counter argument cannot be proven, but I think the EU would be in a much better position now if the Euro were never hatched. Most of the world including the US were in a bad situation before the pandemic. During and after the pandemic it is hard to be positive on any long-term investment anywhere, at least for me. Good luck to you and the EU. DLS
  • DS
    David S.
    30 July 2020 @ 20:36
    Very well done! I would like to see the same analysis on the US. I know we can print our way out, but we are in the same boat. DLS
  • NR
    Nathan R.
    30 July 2020 @ 19:37
    Really quite excellent. Thank you
  • DS
    David S.
    30 July 2020 @ 18:57
    My good Italian friend Niccolò di Bernardo dei Machiavelli might in hindsight look at Italy’s joining the Euro as a major loan program. He might suggest, as I did in the case of Greece, that Italy might be better off declaring bankruptcy and leave the Euroland debt free. I have absolutely no idea if or how this could happen! Many members of Euroland, however, would be better off out of ECB debt and out of the Euro. They certainly would have higher interest rates on any future loans. Since Argentina was able to float long-term bonds, many things are possible. The European Central Bank cannot support so many countries forever without a complete backstop from the Frugal Four, Sweden and Germany. Is it possible to unwind the ECB? Who would own all its bonds? DLS
  • JM
    John M.
    30 July 2020 @ 16:33
    Rather than helping the US dollar (as he mentions in the last minute of his presentation) I think this is an additional boost for gold!
  • MM
    Mark M.
    30 July 2020 @ 05:56
    And the Euro is rising v. the dollar?
    • MT
      Mike T.
      30 July 2020 @ 14:46
      you may think this is a play on words, I interpret the movement in this FX pair as Dollar down, not Euro up
  • PB
    Pieter B.
    30 July 2020 @ 13:50
    This was a great presentation! Thanks a lot!
  • CC
    Cornelius C.
    30 July 2020 @ 07:53
    Is the rule of law in Italy really that bad?
    • LB
      Lorenzo B.
      30 July 2020 @ 12:58
  • LB
    LUIS B.
    30 July 2020 @ 12:19
    Funny how the solution, more Government, is the very reason Italy is in that situation in the first place.
  • SC
    Salvatore C.
    30 July 2020 @ 10:10
    Good assessment, sadly, of the "Italian situation".