March 6, 2008 (LPAC)--The Italian Government intervened in the bond markets this week, offering to swap new five-year bonds with a higher yield, in exchange for ten-year bonds which had reportedly come under pressure from speculative bets. The spreads between ten-year Italian government bonds and equivalent German government bonds hit 55 basis points this week, the highest spread since the launch of the euro, with similar record spreads in Greece, Portugal, Belgium and Spain. According to the Italian newspaper Il Sole, the Italian finance ministry offered the new bonds on March 4 to alleviate stress in the bond market, and an Italian ministry official told the London Telegraph that "We're helping them [hedge funds] swap illiquid securities for more liquid [ones]. It is unusual for us to do this at this time of year."

With the meltdown of the global bond markets, speculators have been fleeing to the relative safety of government bonds, with German bonds considered safer than the so-called "Club Med" nations along the Mediterranean. This means that the sellers of the Club Med bonds have had to offer better deals to attract buyers. "Club Med bonds have been hit hard... and are now getting into trouble," said bond analyst Mark Ostwald of Insinger de Beaufort, who blamed the problems on the failure of "countries like Italy and Spain" to carry out the "reforms" demanded by the bankers.

Ambrose Evans-Pritchard, the Telegraph scribbler who serves as a mouthpiece for certain City of London financial circles, cited in his column today an "expert" saying that a major investment bank had been heavily involved in an "arbitrage play" between Italian bonds and credit derivatives, and may have been caught in a liquidity squeeze. He also cited a currency strategist and Bank of New York Mellon as warning that since under EU rules countries "cannot deflate their way out of trouble.... the stress is surfacing in the bond markets instead as the default risk rises. Italy is now in the worst of all possible worlds because it needs lower rates to cushion the downturn. Instead it will have to pay higher rates on its debt. We are reaching the point where it could become a significant political issue."

It already is a significant political issue, given the British Empire's global assault on the nation-state and its drive to restore the empire as the dominant political system in the post-crash world. The imperial circles for which Evans-Pritchard propagandizes have long predicted that a bankruptcy of the nation of Italy would lead to the breakup of the euro system, and such predictions are often statements of the intent to make sure they come true.