As previously discussed, it’s hard to see how anyone with fiduciary responsibility can buy Italian debt or any other member nation debt after EU officials announced the plan for 50% haircuts on Greek bonds held by the private sector.

Yes, all governments have the authority, one way or another, to confiscate an investors funds. But they don’t, and work to establish credibility that they won’t.

But now that the EU has actually announced they are going to do it, as a fiduciary you’d have to be a darn fool to support investing any client funds in any member nation debt.

The last buyer standing is and was always to be the ECB, which will now be buying most all new member nation debt as there is no alternative that includes survival of the union.

And when this happens there will be a massive relief response, as the solvency issue will be behind them, with the euro firming as well.

Then the reality of the state of their economy take over, as GDP continues to fade and unemployment continues to rise until they figure out austerity can’t work and instead they need to proactively increase their member nation’s budget deficits.

Hopefully this doesn’t take quite so long as it took to figure out the ECB has to write the check.

But this one might take even longer as it will be a function of blood in the streets rather than funding capacity.

   
>   (email exchange)
>   
>   On Wednesday, November 09, 2011 5:37 AM, Dave wrote:
>   
>    For BTPS & SPGBs all inter dealer screens have gone blank and there is no liquidity left.
>    There are really no quotes for even 10y BTPs for example and the last bids were hit
>    about 80BP wider for the day vs Bunds.
>