Confidential reports stern warnings about the Italian national bank debt ratio and possible damaging scenarios when restructuring it!

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The Astellon Capital Partners report on the Italian nation debt is troublesome, as the reports are indicating troubled waters ahead for controlling the debt and repayment on the defaulted loans. This will create other higher issues than only the Greek debt and interest-rates from Brussels and Berlin. The Italian and Rome problem will cause monetary effects for all of Europe, as the debt are like his:

“1980 –1995: Debt / GDP increased by 64%, due to high interest rates levied by Bank of Italy to fight inflation and promote exchange rate stability of Lira within European Monetary System, precursor to the Eurozone” (…)”1995 –2015: Debt / GDP increased by 11%, due entirely to debt servicing costs as Italy ran a primary fiscal surplus over this period” (Astellon Capital Partners, P: 2, 2017).

The continued pressure of the Italian debt is showed with the average primary balance since 1995 have been 2, 1% and the average interest costs of the GDP have been 5, 5%. “Italy among the most fiscally sound member states in the Eurozone, yet also among the most burdened by interest costs” (Astellon Capital Partners, P: 3, 2017).

These numbers are not really positive at all, as the high interest rate by the Bank of Italy together with the rise of debt servicing that increased 11% alone in a decade. That the Italian state have the amount of costs of interests amounting to 5,5% says lots of the economic pressure on the budgets and fiscal policies within the government structures. This does not like a prosperous and strong economic situation.

The report continues with more worrying numbers that the Italian labour costs are 11% higher than rest of the EU average. Certainly also that the average productivity of the labour are 12% lower than the Eurozone average. So you got higher paid workers that work less, which also isn’t strengthening the economy.

That the Italians bank’s they have deflated badly loans that has gone from under 5% in 2005 to the running value of close to 15% in 2016. So that the European Central Bank have bought into the government debt issuance: “2014 –2019: At current government debt net issuance rates and announced QE levels, ECB will have been responsible for financing 100% of Italy’s deficits from 2014 –2019”. This is if the debt is: “Assumes €50bn annual run-rate of government net debt issuance” (Astellon Capital Partners, P: 6, 2017). That is a hefty sum when considering all the other fiscal issues that already put forward.

“Substantial increase in non-bank net purchases of Italian debt required ECB and Italian Banks acquired 88% of government debt net issuance since 2008. Over next six years non-banks will need to increase purchase activity to 7x that of past nine years” (Astellon Capital Partners, P: 7, 2017). So a nation that struggles with high paid performance with low productivity are suddenly needed to get the workforce to 7 times higher purchase activity, meaning the production and selling has to increase seven-fold if the state should have ability to sustain the defaulted debt that has increased and the debt the ECB has bought. Together with the Italian Bank gold-reserve which is lower than the stated and needed figures to be sufficient. The bank has gold-reserves by today’s value about €100bn, but by the ECB agreement need to collateralised that needs to be up to €350bn. That the report claims to be only 25%; while the assets are dwindling too and that is also worrying!

The Assets have from 2011 gone from being around 0% or none, to 2016 when the assets of the Italian bank is now in 2016 -20%. Because this have come a German proposal to avoid an new Argentine Bank collapse case. As the Italian Bank are required independent assessments of debt sustainability.

The great risks for Italy and the Italian republic are these scenarios. Like the hedge funds can buy into with high risks and yields through BTP yields during the 2016-2017. Second scenario in 2018 is that the ECB or European Central Bank will be a marginal buyer of the government bonds and buying debts. Third scenario is that the Italian Banks becoming net-sellers and therefore losing their assets with less of profits in the 2016-2017. Last scenario is unilateral re-profiling or re-domination or some form of Greek-Haircuts by 2017-2018, that means trade-offs and cutting taxes to try to revamp the economy (Astellon Capital Partners, P: 21, 2017).

With these numbers and situation, there are certain men in ECB and in Italy that is worried. The strength and sovereign nation of Italy has to find ways of restructuring the debt and assets. What is certain is that the debtors cannot take it easy on this one. The Italian debts and reserves are worrying as the debt has to restructure and the focus on how the Italian republic has to get more productivity and create more production so the taxes and debt per GDP can go down. This will be painful for the Italian state and their government institutions, together with all the debt and bad-debt that the state has to cover, because the banks cannot afford to lose all of these fiscal funds. There have to be a revolution of something if the Italian republic and its workforce are able to 7 times higher purchase activity. That will not come easy and how they will ever achieve that must be by a unicorn arriving and spinning the Fiat wheels of Torino more than ever before; even getting the world more hooked on Milan fashion design or Illy coffee. Peace.

Reference:

Astellon Capital Partners – ‘Q1 2017 Notes No. 24 – Ciao a tutti: An orderly restructuring of Italian debt’

Ross Thomson MSP letter to Kevin Stewart MSP on Brexit (06.02.2017)

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#ThisFlag: Evan Mawarire – “I’m so glad to be back home in Zimbabwe where I belong” (Footage)

“Thank you for your support and for speaking out for Zimbabwe. None of us should ever be intimidated into silence. This is our home and we have the full right to participate in making it a better country. Like we said in the beginning, HATICHADA, HATICHATYA! ASISESABI njalo ASISAFUNI! FED UP & NOT AFRAID!” (Mawarire, 10.02.2017)

#ThisFlag: “Free at Last to the sound of lying ministers!” (09.02.2017)

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Statement by the IGAD Executive Secretary on the current drought in the Greater Horn of Africa (08.02.2017)

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The Drought Situation

The Horn of Africa is in the midst of a major drought resulting from La Niña and reduced moisture influx due to the cooling of the ocean water in the east African coast. Whilst Member States of the Inter-Governmental Authority on Development (IGAD) are adept at managing droughts, what makes the current drought alarming in the Equatorial Greater Horn of Africa (GHA) region is that it follows two consecutive poor rainfall seasons in 2016 and the likelihood of depressed rainfall persisting into the March – May 2017 rainfall season remains high. The most affected areas include, most of Somalia, South-eastern Ethiopia, Northern Eastern and coastal Kenya, and Northern Uganda.

The climate predictions and early warnings produced by IGAD through advanced scientific modeling and prediction tools, which were provided to Member States and the general public, have elicited early actions (preparedness and mitigation measures). Highly comparable to the 2010 GHA drought, the current depressed rainfall and resultant poor vegetation conditions since March 2016 eroded the coping and adaptive capacities of the affected people. It also depleted water points, reduced crops, forages and livestock production, increased food insecurity, and adversely affected the livelihoods of vulnerable communities in the region.

The number of food insecure human population in the region is currently estimated at 17 million. Certain areas in South Sudan and Djibouti are already under an emergency food insecurity phase, according to the Intergovernmental Panel on Climate Change (IPCC) classification scale. In Somalia, the number of food insecure people doubled in the last year alone.

In the drought affected cropping lands (over Deyr area in Somalia and coastal Kenya), 70 to 100 percent crop failure has been registered. Livestock mortality has been particularly devastating amongst small ruminants with mortality rate ranging from 25 to 75 percent in the cross border areas of Somalia-Kenya-Ethiopia. In addition, livestock prices have dropped by as much as 700 percent.

Terms of trade have declined in the region, with Ethiopia registering a figure of almost 10 percent. This is exacerbated by a substantial negative impact on external balances, as well as a small impact on financial sector-soundness in the other countries. The overall impact on fiscal positions is a likely increase in current budget spending and deterioration in the fiscal balance and weak adaptation capacity.

Despite the downtrend in global agriculture commodity prices, the drought has resulted in an increase in domestic food prices in the region. Cereal prices (e.g. maize) have gone up by about 130 percent, while those of critical food items such as oils, beans and wheat flour increased by at least 50 percent in some pastoralist areas. The limited financial and institutional capacity for effective adaptation to reduce exposure and vulnerability will result in limited safety net to the most vulnerable households.

Drought Response in the Horn of Africa

With the early warning and technical assistance provided by IGAD, Member States have initiated early action to mitigate the adverse impact of the current drought.

Somalia and South Sudan have declared drought emergencies. Kenya announced a doubling of expenditure on food relief to ease the pressure in the drought-affected counties, while Uganda shifted some of its development resources to finance emergency response in order to address food insecurity and livelihood protection. In Somalia, the President of the Federal Republic, as well as state and regional administrations led the issuance of appeals for support and coordinated actors and efforts that scaled-up food security activities to respond to the humanitarian needs of the country.

The USD 730 million allocated by the Federal Democratic Republic of Ethiopia boosted the response effort which, coupled by an above-average meher harvest, resulted to an almost 50 percent reduction in the number of food insecure people, for example, from 10.2 million to 5.6 million.

IGAD continues to reinforce the actions of its Member States using them as guide for complementary action on drought responses. Below are some of the major actions being undertaken by the IGAD Secretariat and its specialized institutions to manage the drought in the region:

  • Through its specialized institutions, IGAD continues to monitor and provide analysis of the evolving situation and advise Member States and the general public on measures to mitigate its impact. The 45th Greater Horn of Africa Climate Outlook Forum (GHACOF 45), which ends today in Addis Ababa, Ethiopia, will present the consensus climate outlook for the next season (March – May 2017) and its likely impact on disaster risk management, livestock production, water, energy and health etc.
  • A multi- humanitarian coordination mechanism led by IGAD that includes UN agencies, Civil Society Organizations (CSOs), and other Non-State Actors (NSAs) is effectively working to coordinate the response effort, as well as guide the recovery process once the situation stabilizes.
  • IGAD is also working with relevant national authorities, UN agencies and CSOs in each member state on the development of an Integrated Regional Appeal that will articulate the priority initiatives within the response plan for each Member State.
  • Furthermore, IGAD will support institutional arrangements and capacity building that needs to be in place to allow humanitarian response plans to be implemented in timely, effective manner.
  • A regional Ministerial Meeting will be convened by IGAD at the end of this month to launch the Integrated Regional Appeal and secure financial resources, which further complements the response undertaken by national authorities and humanitarian and development partners, while at the same time building resilience to climate-induced disasters.

Through the IGAD Drought Disaster Resilience and Sustainability Initiative (IDDRSI) Platform, the ultimate purpose and objective of IGAD and its Member States is to mitigate the adverse effects of disasters through building resilience of relevant national institutions, communities and people, to end drought emergencies and contribute to the achievement of sustainable development in the region.

In this regard, IGAD will remain vigilant in monitoring and advising the people of the region on the drought situation through its’ specialized institution, the IGAD Climate Prediction and Application Centre (ICPAC) domiciled in Nairobi, and shall continue to support and complement regional and national actions on drought response and recovery.

Land urgently needed to avert ‘drastic deterioration’ in Burundian refugee camps in neighbouring countries (08.02.2017)

Lusenda Burundi Refugee Camp

Last year, the UN agency received a $96.1 million in contributions for the Burundi situation, however, it was 53 per cent of the amount needed.

WASHINGTON D.C., United States of America, February 8, 2017 – Stalled peace talks in Burundi are forcing hundreds to flee every day seeking refuge in neighbouring countries, the United Nations refugee agency warned today, appealing for more support, particularly land to shelter for new arrivals and to ensure protection of children and prevention of sexual and gender-based violence.

According to the Office of the United Nations High Commissioner for Refugees (UNHCR), since April 2015, more than 384,000 Burundian refugees have fled to Tanzania (222,271), Rwanda (84,866), Uganda (about 44,000) and the Democratic Republic of the Congo (32,650) and its projections indicate that numbers will cross half-a-million by the end of the year.

“Without allocation of new land to extend capacity in existing camps or build new ones, these countries will struggle to provide sufficient shelter and life-saving services in the camp sites,” William Spindler, a UNHCR spokesperson, told the media at the regular bi-weekly press briefing in Geneva today.

“Camp facilities also need to be upgraded, including construction of more homes, schools, health centres and better drainage systems to lessen the risk of disease,” he added, noting that host countries have been generous with their support but more action is needed to avert a dangerous slide in standards and conditions.

UNHCR also appealed to donor nations to step up their assistance and funding.

Last year, the UN agency received a $96.1 million in contributions for the Burundi situation, however, it was 53 per cent of the amount needed.

Burundi: H.E. Mpaka manipule la délégation de l’opposition pour le 2ème Inter-Burundian Inclusive Dialogue (24.01.2017)

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HM Government of Gibraltar responds to article in UK Press (05.02.2017)

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President Mugabe attacks UN leaders (Youtube-Clip)

https://www.youtube.com/watch?v=-N-yUjqHSzI

#ThisFlag: Pastor Evan Mawarire in Chikurubi Prision (05.02.2017)

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