Italy is not Spain and the Budget Math Proves It

Italy Sells Record Amount At Bond Auction – WSJ.com.

Italy raises €18bn in huge bond sale – FT.com.

Trajan's Column, a distinctive triumphal column in Rome, commemorates Roman Emperor Trajan's victory in the Dacian Wars (A.D. 101-102, 105-106).

After reading that Italy had completed this large bond sale and completed most of its financing for the year, I was a bit skeptical of the numbers being reported by the mainstream media.

I performed some quick, Internet research and discovered that Italy is actually reporting accurate numbers, unlike Spain and Greece. The reasons for this are twofold. Italy is not in a depressionary death spiral, just a recession. It is easier to report accurate numbers when the whole economy isn’t flat-lining.

The second reason is that Italy is not in as much trouble as Spain or Greece, so it does not have to lie. Remember, you only have to lie when it gets serious.

These are the numbers that I found during my research. Italy has to roll over about €320bn in maturing debt this year, which is the largest number that I could find. It’s budget deficit is projected to be €86bn at 2.3% of GDP. Adding these numbers together, we get financing needs of €406bn for 2012.

Italy had sold €370bn prior to this auction. Adding in the latest auction results of €18bn, we arrive at €388bn leaving a mere €18bn to finance by the end of the year.

In another Reuters article, the Italians are saying that they will need to finance €465bn for 2012. The difference in my figures and their figures is probably short-term bills that mature in six months or less.

Italy is in better fiscal health than some members of the so-called core.

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