Good morning! It's Paul here.

Italy/ Euro

It seems to me that we're entering a new phase of the ongoing crisis with the single currency. Previous measures, centred around Greece, were little more than papering over the cracks, of a currency union which is unworkable in the long term, in my view.

The press are now picking up on the political crisis in Italy, whereby the President has blocked the appointment of a eurosceptic finance minister, thus causing the collapse of the latest Government after 4 days. So new elections are now necessary, which are likely to cause a bigger eurosceptic majority (according to opinion polls), putting Italy on a collision course with the EU establishment.

To me, this seems far more serious than the Greek Euro crisis, because Italy has 2.3 trillion Euros of national debt. We know what the EU's strategy is, in dealing with rebel Governments, since Yanis Varoufakis recorded all his meetings on his iPhone, and then published a book about it - "Adults in the Room" - highly recommended.

I feel that the only solution for the Euro, is for Germany to leave. Running an export surplus of 8% of GDP (breaking the EU rules limiting it to 6%), is sucking money out of the rest of the EU, into Germany. This is one factor is causing the Italian economy to have stagnated for the last 20 years, and its people have had enough. Whether they have the stomach to leave the Euro, and see their banking system collapse, is another matter. Ultimately that's what caused the Greeks to capitulate.

So what to do? Personally, I opened some shorts (via spread bets) on the Italian market, and bonds, last week, which unfortunately got partially stopped out over the weekend. However, the remaining positions are now nicely profitable, which is doing as planned, and protecting the rest of my portfolio.

My small cap shares are too illiquid to trade in & out of generally, so that's why some portfolio hedging is important to me. Also, as I use gearing, then hedging is very important. I'm also in the process of selling all my liquid, large cap positions, to kill my gearing. After all, they're easy enough to buy back, when this Italian crisis has abated.


Share price: 32.5p (down 17%…

Unlock the rest of this Article in 15 seconds

or Unlock with your email

Already have an account?
Login here