Success or failure of EU summit hinges on Italy - FT.com

Success or failure of EU summit hinges on Italy - FT.com


Basking in the glory of the soaring euro and euphoric equities on Thursday, it was easy for European leaders to think they had finally done enough. Perhaps, just perhaps, investor confidence in the eurozone could be restored.
Reality returned with a bump on Friday when Italy was forced to pay more than 6 per cent to borrow money for 10 years – against less than 4 per cent a year ago.
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After two years of vilifying credit default swaps, the derivatives have been adopted as one of the ways to “leverage” the European financial stability facility, the eurozone bail-out fund.
In addition to that, after governments (correctly) put part of the blame for the original 2007 crisis on structured finance, the EFSF is to set up a special purpose vehicle with two tranches to attract money from China and other sovereign wealth funds. Some of the richest countries in the world are using the model that got them into trouble in the first place to persuade some of the poorest countries in the world to help them recover.
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