Italy

Tuesday's session started off on the back foot, with the Euro first sliding on Draghi's dovish comments before Europarliament on Monday where he signaled no imminent change to ECB’s forward guidance coupled with a Bild report late on Monday according to which Greece was prepared to forego its next debt payment if not relief is offered by creditors, pushing European stocks lower as much as -0.6%. However the initial weakness reversed after Greece's Tzanakopoulos denied the Bild report, sending the Euro and European bank stocks higher from session lows.

Despite a promise last week by Italian Industry Minister, Carlo Calenda, that Italy would not have early elections this autumn, Italian stocks have tumbled to one month lows and the Italian bank sector is down 3% in Monday trading, its biggest one-day loss in nearly 4 months, with traders citing rising risks that the euro zone's third largest economy could head to early elections in the autumn.

Authored by Judith Bergmann via The Gatestone Institute,

• Shielding heads of state from seeing the consequences of the policies that they themselves have forced on the entire European continent represents a staggering new level of hypocrisy.

We start with the overnight observations by Mint's Bill Blain who points out something contradictory: on one hand Europe is said to be "fixed" with inflation expectations rising and the ECB preparing to take its foot off the gas pedal. On the other hand, "European Sovereigns will start issuing long bonds again.... A French 30yr is in the works, Italy and Belgium are both looking, while other rumours say the EFSF might be in the frame. ...

That Italy has a bank solvency problem will not come as a surprise to anyone who has been following events in Europe for the past 7 years.

Just yesterday, Italian daily La Stampa reported that four months after the third government bailout of Italy's third largest bank in as many years, the Italian government may have to inject even more cash than planned into Monte Paschi, the world's oldest and apparently always insolvent bank.