Italy Needs An Offer It Can't Refuse

To raise "bailout" money the EFSF sells bonds. In its first auction after the new Merkozy agreement, not enough investors wanted the garbage and the fund ended up buying some of its own bonds.The Telegraph reports Eurozone bail-out fund has to resort to buying its own debtThe European Financial Stability Facility (EFSF) last week announced it had successfully sold a €3bn 10-year bond in support of Ireland.

Today the ECB left interest rates unchanged and hinted at future bond purchases but also warned "Governments must stand ready to activate the EFSF/ESM". The Financial Times has details in Draghi prepares for fresh bond buying

Politicians never give up on bad idea except by death or removal from office. In spite of obvious failures to leverage the EFSF fund (still without rules as to how the thing even works), French president Nicolas Sarkozy is back at it, hoping to create a three-fold expansion of the EFSF via tradeable insurance certificates with guarantees on as much as 30 percent of the bonds.

Article written by Prieur du Plessis, editor of the Investment Postcards from Cape Town blog.This post is a guest contribution by Rebecca Wilder, author of the News N Economics blog.

If one looked at the EURUSD exchange rate or US equity futures one could be forgiven for thinking things did not go so well in Italy's election. The former is fading quite rapidly from its overnight exuberance and the latter is stable at pre-FOMC levels. However, a glance at the initial exuberant, nothing can stop us now, Italian (and Spanish) bond and stock markets and it appears the problems of the world have been solved. Spain's 10Y yield is back below 5%, Italian 10Y spreads have collapse 30bps to near multi-year lows, and Italy's equity market is up 3.5%.

With every passing day, there is increased chipping away of support for the Euro. Please consider Linde CEO says Germany should mull euro exit Germany should consider leaving the euro if efforts to impose fiscal discipline upon indebted euro zone countries fail, the head of industrial gases firm Linde told German weekly paper Der Spiegel.

All the schemes and maneuverings by eurocrat clowns and misguided economists hoping to get 4-1 or even 8-1 leverage on the EFSF bailout fund while keeping the fund's AAA rating intact have officially died on the vine. Even the EFSF committee admits as such. The Financial Times reports Euro rescue fund’s impact in doubt