Mario Montipinnochio

Just so we all have this clear in our minds, Italy this week auctioned almost 20 billion euros of government bonds. Or, put another way, borrowed a further 20 billion euros.

“The fact that they managed to sell this much at the end of the year should be taken as a positive sign,” said Eric Wand, a fixed-income strategist at Lloyds TSB Bank Plc in London. If you say so Eric. However, let’s just follow the provenance a little here, huh? The ECB has lent Italian banks a shedload of money at low rates, and obviously bought a sizeable chunk of these bonds. It also lent other banks further shedloads of money, so they too could buy some of the bonds. Thus the bonds that the banks were strongarmed into buying can now go to paying back those same banks the 53bn euros Italy already has to repay them during Q1 next year, prior to then borrowing a further half trillion euros during 2012 just to keep its mouth above water.

Eric love, all I can say is that you are easily rendered positive about such things.

After today’s sale, the yield on 10-year Italian notes climbed back above 7%. But Mario Monti declared that the worst was over, and his country had “stepped back from the precipice without a railing, moving in a north-westerly direction away from Greece”. He did not say whether it would now proceed over the Alps of economic growth and thence through the valley of fiscal discipline on its way to the Sea of plenty armed with water-wings, but no doubt he will tell us in due course.

However, in a tone contradicting his optimism somewhat, Signor Monti called for the biggest bazooka possible to be put together. Given that Italy just dived back into recession, I know what result my money’s on.