The Global Note: Italy’s Cri$i$…What To Do About Iran?…Giant Space Junk?…Undersea Volcano


-THE NUMBER TO WATCH: ITALY’S BOND YIELD…Italian Prime Minister Silvio Berlusconi’s pledge to resign hasn’t done much to assuage investors’ concerns. And here’s a HUGE problem: Italian borrowing costs have set a record for the third day in a row, crossing a dangerous threshold of 7 percent – reaching levels that prompted bailouts for Ireland and Portugal. The nightmare scenario here – playing out in not-so-slow motion – is a true debt disaster in the world’s 7th-largest economy, and the inability of the Eurozone to help. Italy’s debt is five times that of Greece, and those spiralling borrowing rates make it increasingly unlikely that Italy will be able to manage its debt. One thing Greece and Italy share: a political morass — and apparent inability to put fiscal matters in order. And if you think Greece matters to the Eurozone, and the global economy, think what an Italian collapse might bring.

-STOCKS HAMMERED…The Dow is off nearly 300 points as we write. The main Milan stock index was down 4.2 percent while Germany’s DAX was down 1.8 percent and the CAC-40 in France fell 1.9 percent. The FTSE 100 index of leading British shares was 1.2 percent lower.

-BERLUSCONI…Berlusconi remains in office at least until next week when a vote is planned on required austerity measures. ”I will resign as soon as the law is passed,” Berlusconi said today. Once he steps down, Italian President Giorgio Napolitano will begin consultations to form a new government. The most widely-discussed name to lead a government is Mario Monti, the former EU competition commissioner. From Phoebe NATANSON in Rome: Italian newspapers are suggesting Berlusconi’s resignation may not be enough. A front-page column in today’s Corriere della Sera warns, “foreign observers will reach the conclusion that the end of the Berlusconi government does not necessarily mean the advent of a more credible, trustworthy government.”

-MEANWHILE, IN ATHENS…As power-sharing talks drag into a third day, Greece promises to finally announce its interim prime minister and cabinet today. The main sticking point has been a demand by European officials that both parties submit written guarantees that they support the new debt deal. The most likely candidate to replace Papandreou continues to be former European Central Bank vice president Lucas Papademos.

-STUDENTS MARCH ON LONDON …”Austerity” may be the answer to many of these crises – but of course it’s never popular. Lama HASAN reports thousands of students are marching in London today, protesting ever-higher tuition fees. Four thousand police officers are out in the streets — and they say they are prepared to use rubber bullets if necessary. Last December, a wave of student protests ended in violent clashes and that iconic photo of Prince Charles and Camilla trapped in their Rolls Royce as students blocked their way.

-”LOST DECADE” FOR GLOBAL ECONOMY?…The head of the International Monetary Fund, Christine Lagarde, has warned that the global economy is at risk of being plunged into a “lost decade”. Ms. Lagarde said the ongoing debt crisis in Europe has resulted in an uncertain outlook for the global economy. “We could run the risk of what some commentators are already calling the lost decade,” Ms Lagarde said. 


- WILL ISRAEL ACT?…From Alex MARQUARDT in Jerusalem: There is a something of a collective “See? We told you” in Israel this morning following the release of the IAEA report. It’s the biggest story here and every commentator has his/her take – but the official response is silence. No reaction from Netanyahu’s office; and they told top ministers not to respond either. “The goal is for people not to think that we were prepared with a ready response, and to show moderation,” senior officials told the Ma’ariv newspaper. “We have been in the headlines for long enough and now we have decided to leave the stage to others.” But from that silence, and from officials on background, the message is clear: Israel expects the US and the West to move swiftly and impose crippling sanctions on Iran. Israel has helped encourage those sanctions with all of last week’s talk of a unilateral strike on Iranian nuclear facilities. Today there is no talk of strikes, the consensus is that they are not imminent but could happen next year should this latest round of sanctions not prove debilitating enough. Defense Minister Ehud Barak addressed the military scenarios on the radio yesterday: “War is no picnic, but in any scenario, there will not be 50,000 fatalities, not 5,000 fatalities or even 500 fatalities,” he said. “The description as if two people, the prime minister and I, were sitting in a closed room and launching a step to strike Iran—is delusional.”

-OIL PRICES SPIKE…From Lara SETRAKIAN in Dubai: Oil prices are up on fears of a nuclear Iran and/or a military conflict to stop it. Of course, a military strike on the Islamic Republic is the ultimate political risk for oil markets, potentially closing down the Persian Gulf. Iran has specifically threatened to shut down the Strait of Hormuz, which sees passage of 40% of the world’s shipped oil. That would also cut off their own exports/revenue stream, but they might think that’s worth it if backed into a corner. The US Navy could theoretically keep the Strait of Hormuz open, but their ability to do so today is untested. That leaves Hormuz as one of Iran’s top trump cards. (Cue dramatic 1980s video of Operation Earnest Will, also known as the ‘Tanker War’- a similar scenario prompted by Iran-Iraq War rivalries: )

-AHMADINEJAD: IRAN WON’T RETREAT “ONE IOTA”…Iranian President Mahmoud Ahmadinejad spoke out today against the IAEA’s report saying, “this nation won’t retreat one iota from the path it is going.” In front of thousands of people in central Iran, Ahmadinejad spoke out for the first time today since the report was released. Ahmadinejad strongly chided the IAEA saying its discrediting itself by siding with “absurd” U.S. accusations.


For the first time, the general public will be able to view a Guantanamo military commissions proceeding. The LA Times reports today’s arraignment hearing of Abd al Rahim al-Nashiri highlights a continuing legal and ethical dilemma for the Obama administration. Nashiri, 46, is on trial for allegedly directing the bombing of the U.S. destroyer Cole in October 2000 and could be sentenced to death if convicted. Due to rules enacted during Obama’s tenure, detainees have access to legal counsel and classified information as well as more public access to proceedings.


A study out today from the U.S. Commission on International Religious Freedom finds textbooks in Pakistani schools foster prejudice and intolerance of Hindus and other religious minorities. The report found systematic negative portrayals of minorities and make very little reference to the role played by Hindus, Sikhs and Christians in the cultural, military and civic life of Pakistan. Even teachers view non-Muslims as “enemies of Islam.” The findings indicate how deeply ingrained hardline Islam is in Pakistan and may help explain why militancy is tolerated – even supported – in the country.


At least 50 insurgents have been killed after they attacked NATO bases in Afghanistan’s Paktika province. The insurgents are thought to have moved over the border from Pakistan to carry out the attack. From Nick SCHIFRIN in Pakistan: US military officials say soldiers repelled approximately one hundred militants near the Pakistan-Afghanistan border last night using artillery and close air support, one of the largest attacks in eastern Afghanistan in a year of large attacks. It was late afternoon when insurgents began massing near Combat Outpost Margah, just a few miles from the Pakistan border, according to US military officials. The fighting continued past midnight. ISAF says at least 50 militants died. No Americans or Afghan security forces were injured or killed. This is the second major attack on this base in the last 5 weeks. On Oct. 7 militants fired 111 rockets at the base and almost managed to get a large truck bomb to the base’s front gate. US officials say that it’s too early to know where the militants were from, but in this area the militants are commanded by Haqqani fighters — who stream across the border from their safehaven in North Waziristan.


A Russian space probe aiming to land on a Mars moon was stuck circling the Earth after equipment failure Wednesday, and scientists raced to fire up its engines before the whole thing came crashing down. One U.S. space expert said the craft could become the most dangerous manmade object ever to hit the planet. As Alexandra NADEZHDINA reports from Moscow, the Zenit-2 launch vehicle carrying the Phobos-Grunt probe lifted off from the Baikonur space center at sixteen minutes past midnight Moscow time today. The spacecraft was supposed to use its own booster to reach the designated trajectory, but failed to do so. “It has been a tough night for us because we could not detect the spacecraft [after the separation],” Vladimir Popovkin said. “Now we know its coordinates and we found out that the [probe's] engine failed to start.” They have three days to start the on-board engine and put the probe on the designated trajectory before the batteries run out. The loss of the Phobos-Grunt probe would deliver another serious blow to the country’s space exploration program — but more worrisome would be a giant and dangerous piece of space junk.


From Akiko FUJITA in Tokyo: This story is sure to give some hope to those who are still searching for some trace of loved ones. Kyodo reports the body of a man missing since the March tsunami has been recovered – inside his own car. The car was found in August and taken to a temporary debris site, but nobody bothered to look inside. The city of Kamaishi contacted the owner’s wife just last week, saying the car was sitting in a debris lot. She went to check it out, and found her husband’s remains in the driver’s seat. Kamaishi officials are now going back and double-checking every one of the 3,000 cars they recovered in the wreckage. There are still thousands of bodies missing. The news comes on the same day crews in Fukushima suited up in radiation suits, and launched yet another large-scale search for bodies. The operation is scheduled to last 3 days and coincides with the 8 month anniversary.  


The cathedral that was the centerpiece of downtown Christchurch, New Zealand, and heavily damaged during February’s earthquake – will be demolished to make way for a new cathedral. Dozens of New Zealanders attended an emotional “deconsecrating” ceremony earlier today.


Joe SIMONETTI notes these aerials of an undersea volcano erupting off the Spanish Canary Island of El Hierro. A series of quakes set off the volcano, including one measuring 4.0. The islands’ Coast Guard flew over the area and captured the eruption.  


…that the Berlin Wall was breached, the singular moment in the collapse of communism. There were ceremonies in Berlin today.  


Moscow authorities are discussing a possible location for a giant 220-m (722-ft) ferris wheel as part of a plan to attract more tourists to the Russian capital. The wheel, tentatively called the Moscow View, was designed by the American Gensler design bureau, which has the River Park in London and the 632-meter Shanghai Tower in its portfolio. If built, the wheel will surpass the world’s tallest 165-m (541-ft) Singapore Flyer, the famous 160-m (520-ft) Star of Nanchang in China, and the Europe’s tallest 135-m (443-ft) London Eye. The construction cost of the Moscow View is estimated at $300 million, according to Kommersant.

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