italy faces a showdown. there is a bond option today in italy.ould you buy italian government bonds? ♪ manus: good morning from dubai. i am many -- manus cranny. these are today's top stories. populist onslaught, the country should be set for a snap election as early as july. five-star and lead surge in new opinion polls. contradiction -- conversation, the prime minister tells bloomberg no deal is better than a bad deal as the u.s. president moves ahead with tariffs on china. markets in turmoil. u.s.s are in the red from to asia as investors flee risky now on theused italian debt option. the worst is over for italy. with many of these stories developing around the world, we have our troops in position. and recording his life in rome -- anne marie is in rome. we have mark cranfield from singapore in london. we have our guest post from vanguard. let's get you did these markets. we are waiting for indonesia to drop their data in terms of are they going to raise rates? we accept -- expect .25%. you are seeing a little pressure in equity markets. trum

that will and will continue on its european path italy deserves respect.no different interpretation there barbara how worried are the italians that the current political standoff could spark potentially another financial crisis. the funny thing is that this message particularly has not reached italy at all what happens here is if we think back to what gets said there was one very true sentence in his last remarks and he said that people tend to europe and europe price their their problems and that is exactly what many italians do they send home point the finger against europe and say it's their fault somehow nobody can explain how but it's their fault that we are at the point that we're at and we need more help from europe and we want more say in europe and we want to negotiate with europe about our future all that is very unclear but it's very strong emotionally and so there is no clear understanding about the real and present danger if people are in we're not seeing a bank run yet people have not realized yet that if the european central bank can't lend

not from only beer to italy but from africa. to europe. this gate arrived for lack of a political governance african. and for the lack of vision. of european leaders i remember the discussions with my colleagues in two thousand and fifteen when i was prime minister please halpert not italy please out of these people who died in the business see a woman who died in the sea a pregnant they were a child killed all died in the sea. ok maybe i lost two pints. in the survey in the elections but i prefer to save the human life the save the. two points in my in the sun what would you do right now. i mean he's not does not mean i think everyone could arrive in italy i consider priority blot the people in africa and give them the paternity to be able to create a new life in africa particularly because of their long and perspective what about now people coming to your country should they be sent there last syria that a lot of the number of migrants are. really. significantly discrete is the so now the situation is absolutely better than the past but

we will not take a knee jerk reaction on italy. we need to see the projections out of a new government formation. we have to see the discussions around budget 2019 these are the things we're looking for going forward. >> you talked about the word costly yesterday the italian government sold 5.5 billion euros of six-month debt that went from a negative yelled to above 1% over the past month. that makes it very expensive in the short-term for italian taxpayers, doesn't it? >> i think markets today calmed down a bit the parties are now becoming far more mindful of the impact of the statements they're making on the markets and on the cost of funding for italy and the president is stepping in to work in the best interest of what's right for italy. i expect things should calm down a more pragmatic sense will overcome the political situation in italy >> do you think the eurozone back stops introduced in the last few years will be sufficient to contain any potential contagion we see beyond this domestic italian political problem we're faci

what should happen with the ock in block in italy -- l italy?ncine: -- fabrizio: we project the deficit at 1.6. we are running a primary surplus above 1.5%. that is declining. we have a budget which is expansionary in its content, but in line with european framework is the path to follow. francine: what should happen with the vat? v.a.t.? fabrizio: i think we should find a way to sterilize the increase in a way which is not damaging to growth. i think that is possible. we have shown that these kinds of issues can be sterilized. thecine: i know we started interview with you saying that investors should focus on the fact that the italian economy is strong. if you are an investor, what is the case for staying in italian equities, or in italian bonds? what is the business case for italy? fabrizio: the first business case is obviously that italy is less expensive than other countries. this is a very strong business case. look at the sectors. i think we have a very strong manufacturing sector. let me just give you a number. orts raisedur exp above 500

it is not so clear in italy. i think the numbers are a bit , especiallysplit when you see the survey, but i think everyone will concentrate on the election of this issue, then people will speak about what they really believe about the ability of the country to stay in the euro. my workence, as some of has shown, that it is not the euro that brings the problems in th italy, it is the ability to reform. and again, there is a difference here with greece where the mandates staying in the eurozone was very, very clear. here in italy, you see that the mandate is not as clear, of course we have not had a proper debate on the issues. that is why it is important for the next three months, the summer, or whenever the elections happen, to discuss the issue and decide. does thisjulian, impact policy normalization? julian:. yes they are going to be very reluctant to tighten monetary policy to four. they will undoubtedly want the italian populist on the side, and i agree, it will become an active debate through the whole of th

the market does know at the moment that the central bank is buying italy, can continue buying italy so there's a reinvestment point, which is important needless to say i don't want to worry viewers out there in the u.s. unduly. but at the end of the day we are in uncertain times at the end of the day there will be further backstop by policymakers but this election risk at the end of july, the timing of the ecb is in the great. they have a meeting just before when the italians could well be going to the polls again >> the last couple of days, italian bonds have fallen the most since italy joined the eurozone as a combined monetary union what are you advising clients to do now with their money given everything that you have just told us? >> luckily i don't advise clients about what to do with their money. i focus on the macro trends. at the moment we would expect ongoing volatility and there could be further spread widening the banking sector is intwined in this. so i would expect the next few weeks to remain volatile as i say, we're not looking for a eurozone break up story. that's not

this is the actual point i have a great problem in italy this is not a free democracy italy has been forced into a new political crisis after the italian president rejected the idea of paolo being the next economy minister for the country in the coalition government of the league and the five star movement well mr civoniceva is eighty one years old he's a former trade minister in italy and he's had a long career in the financial sector but he was deemed to be too euro skeptic he's talked out in the past against the euro itself in the past with his latest book actually suggesting that the single currency is actually a german cage and that's why the economy minister now we have heard one coalition leader who actually suggests that the german media and german politicians have had an underhand role in stopping that appointment german journalists and politicians insulting italians the big lazy tax evaders freeloaders and ungrateful people and we should use a fine and smooth as though they like no thanks for those accusations came after a number of german publications basically showed thei

italy and the u.s. stock market. vonnie: fantastic. paul donovan said that bond market moves do not recall monetary unions. -- break off monetary unions, true or false? >> false. in the context of in between. it is not the rattling and the european central banks said we will not react to crisis. that is a mistake. they have play this poorly. yields are rising to the 3.4 level which upheld and they went higher. that is just in the 10 year. crisis.a preventable if the european central bank as they have acted -- if they would have acted as they did in the past. mark: you get the blame of being accused of delving into politics , it does not want to be associated with that. >> you can argue it is in politics by not doing much. that is their line which i respect to a degree. do not respect they pay less than 4.6 trillion euros of taxpayers money to get yields driven into the ground and massively negative. why you should read his opinion pieces, because you get the truth. you get the honest opinion. this was n

i want to bring you comments from the central bank governor in italy he is saying italy must press on with reforms italy must be a respected voice on debate in redesigning eu regulations. there are no short cuts for cutting debt he says italy is only constrained by eu logic, not eu rules. and we are only a few short steps away from losing trust he says growth is increasingly self-sustained, and as italians we cannot disregard constitutional constraints >>> in asia i want to bring you news about -- some details here, about ant financial. it closed its late st funding round. the fund-raising values the operator of ali pay at 1$150 billion. apple is reportedly planning to use high-end technology on screens for its 2019 iphone models the tech giant will use oled panels which makes smartphone screens sharper and brighter currently only the iphone x uses the oled screens the report moves stocks of some key apple suppliers with japan display falling more than 20% at one point. >>> a drastic profit warning from dixons carphone the retailer says profit will fall 21% this financial year thanks

yvonne: you have italy, oil.e whammy maybe what is going on in the trade front with the president slapping those tariffs of $50 billion on investment curbing when it comes to sensitive technology coming from china. that is going to weigh on china during the session. traders unwind bets on four rate hikes this year as bond markets on full boil around the world. let's go to kathleen hays in new york with more. we have seen these bond markets basically have blown up from europe to the u.s. are these market moves justified or the investment fact of the fy leaving the eu overdone at this point? kathleen: sometimes you sell first and ask those questions leader. we don't call it a technology but the fact the u.s. markets were closed for three days, so much happened over the weekend crumbling ofhe what admitted a coalition. all these markets were hit very hard. i want to start crumbling of what admitted a coalition. with one of our bloomberg library chart, which looks at the 3% yield. i love the title. story.a big the en

disadvantage for italy. changing prime ministers, but this is much more serious than that. an election later this year may become an unofficial referendum on italy's membership of the euro and on its place in the european union, that this country helped to create. james reynolds, bbc news, rome. police have arrested three people suspected of drug dealing at a dance music festival in portsmouth, where people died at the weekend. where two people died at the weekend. the news comes after 18—year—old georgia jones and 20—year—old tommy cowan were named as those who died after falling ill at the mutiny festival on saturday night. they were among 15 revellers admitted to hospital from the event with organisers issuing a warning over a "high strength or bad batch" of drugs. a young man has been hailed as a hero in paris after scaling a building to rescue a small boy who was dangling from a balcony. for saving the four—year—old and is now to be made a french citizen. today, he met the french president emmanuel macr

news going to the singer says he supports italy's caretaker leader and advises the talia's not to vote for populists in the next election the leader of one of those populist parties calls on him to resign meanwhile worries about the euro zone's third largest economy since stocks in the euro tumbling after big falls in milan the german stock exchange showed signs of the fear also coming up. remembering the deadliest racist attack in germany's post-war history a german chancellor leads the commemorations alongside the woman who lost five members of her family in a hate crime twenty five years ago in the city of song and close it looks as if one of the world's great aviation mysteries school were mean just that the mystery authorities have ended the four year hunt for malaysia airlines flight m.h. three hundred seventy but families of the two hundred thirty nine people on board still want answers and will talk to one of them in india. on leyla iraq thank you very much for your company everyone we begin the show with the a political. turmoil in italy which is deepening and causing a ripple

it is all about italy.s also so much more especially with what is happening here with the fed. italy's political crisis has moved to the back burner for now it's shadow is moving to the biggest central bank that is prepared to meet and two weeks time. let's get more on this because kathleen hays is here with me with a look. let's start with the fed, the focus is in the economy, and a lot is happening in addition to that. if one iswe know watching the federal reserve, and the italian political crisis. ast could affect the policy, bond markets have yields climbing. the italian crisis is still but the focus has receded a bit and we can focus on the economy. the news today i want to look at at first quarter gdp revised 2.2%, that is about the fed view of 1.8%, so our inventory growth points to inventory building, a lot of big houses on wall street revising forecast for second-quarter gdp up to 3% or higher. banks givedistrict their forecast to the feds come up with what they are seeing in the region. growth is

if this is the case we have a big problem in italy. it's called democracy this is not a free democracy. the league in five star parties had spent days drawing up a coalition pact aimed at ending a stalemate following inconclusive elections in march. their agenda is to tear up the political rulebook but they may have gone too far shoppers in rome seem to side with the president. i'm absolutely pro european and i believe that italy is connected and must have a connection reviewer for future. at a certain point the president who looks after the constitution sees that things are moving in a direction that he doesn't want in my opinion he simply applied the constitution. some took the political turmoil with the sense of humor you know laugh at prosecutor coup it's the same old minister but we are totally and so it's normal we managed to get by so viva italia. if conoco to really is confirmed by a majority in parliament he will plan for new elections next year if he fails to go near enough support italians could be heading to the polls again

italy has done a lot.classic candy and debt trap, it needs capital investment in a framework from europe. that has just been absent. i think it is frustrating to see we are back in another euro crisis. matt: it is difficult to get that when everybody is spooked. the italian banks and the spanish banks got hit hard. deutsche bank was punished for its italian holdings. that doesn't really help the situation much. guy: we hope was part of history. on the positive side, this is very different from the greek crisis from the 2011-2012 euro crisis. achievement,kable the frequent 7% of your annual gdp is getting interest rates. wasn't sent to continue with five-star in the leak and empower. : remember, that was a deficit from 2001-2012. now come other part is up. -- report is up. you think that with the pressure of being put on, especially by macron, that we could have this.ted think there is a real frustration at this sort of enforced policy era, which is giving so much oxygen as you like to the populist movement

not from only beer to italy but to from africa. to europe. this gate arrived to for lack of a political governance in africa. and for the lack of vision. of european leaders i remember the discussions with my colleagues in two thousand and fifteen when i was prime minister please halpert not italy please out of these people who died in the business see a woman who died in the city pregnant they were a their child killed all who died in the sea. ok maybe i lost two pints. in the survey in the elections but i prefer to save you more lives than save the. two pints in my in the sun what would you do right now. i mean he is not does not mean i think everyone could arrive in italy i consider priority blot the people in africa and give them the paternity to be able to create a new life in africa particularly because of their long and perspective what about now people coming to your country should they be sent their last syria there are a lot of the number of migrants are. really. significantly discrete is that so now the situation is absolutely bett

so there's not too much you authorities can do to help italy as long as italy is not firmly committing itself to the euro zone and the e.u. so we don't know yet how italy will play out but as you are in london i mean breaks its supporters have long said that the united kingdom won't be the only e.u. member to leave the bloc are they right. well i don't think so. most euro so and you country is still very much support the the single market and and the currency if you look at the latest europe or only to survey for example you can see that in every single country distill clear support for both the euro and the euro zone and also if you look at the countries outside the or the euro zone for example the balkan countries . there are still a lot of conscious which want to join the e.u. or also the euro zone some of the eastern european countries so we still see a strong demand for the euro and the euro zone in general all right some optimists in there coming from london has an economist at bear in the bank thank you so much . all right outrage over a not very nice tweet sara absolutely no op

from berlin tonight the power of populism in europe italy ushers in a radical new government today italy's president gave. his approval to become a prime minister a political novice charged with leading a government of extremes is this the beginning of europe's next crisis we'll bring you the latest from rome also coming up you'll use script all speaks the russian national enter father more attacked with a nerve agent in the u.k. last march she says her life has been turned upside down. and one of america's literary giants philip roth is at the age of eighty five his works explored the tragedy and the comedy of the jewish american experience will take a look back at the wife of the pulitzer prize winning novel. it's good to have you with us tonight in italy a political picture of certainty mixed with uncertainty today italy's president approved the appointment of juice. to be the country's next prime minister. a little known lawyer and a political novice he was put forward for the post by italy's two main populist parties the far right league and the anti establishment five star movement i

citizens is that a possibility what's next for italy. certainly that does exist as a technical possibility. and people who agree with the call for his impeachment take the view that he didn't really have much of a political mandate for what he did if you selected by yet parliament but he's forwarded the will of two parties that emerged as winners from the most recent elections but i think on the other hand these calls for each minute are really just the beginning of. the list election campaign we can expect a lot more fiery rhetoric between now and any new election and i think realistically it is hard to imagine a majority in parliament this would be required voting in favor of impeachment of this president it would also send a signal that italy was drifting really rudderless and will further aggravate the current crisis ok so is the new elections a real possibility bant the italian president saying the euro was central to italy's future but italian voters are not so sure what does russell's want to see happen in rome. well there are mix

a disadvantage for italy.s is much more serious than that. an election later this year may become an unofficial referendum on italy's membership of the euro and on its place in the european union, that this country helped to create. james reynolds, bbc news, rome. a brief look at some of the day's other news stories. a british national, who was held on death row in ethiopia on terrorism charges, has received a pardon. andy tsege has been detained in the country where he was born since 2014. it's not clear exactly when he will be released. a 28—year—old man has been arrested on suspicion of murdering an 11—year—old girl and a woman aged 31 in gloucester. they were found seriously injured by police just before five o'clock this morning. police have urged anyone with information about the incident to get in touch. the health secretary, jeremy hunt, has promised to make the nhs in england a beacon for pay equality, after launching a review of why female medical staff are paid less than their male counterparts. at

but it's about more than stock markets warns italy central bank italy's future within the e.u. can only be secure as a reliable partner to go beyond the view to simply preserving we have to keep in mind the grave risk of losing irreplaceable trust in a short period of time. the trust in the strength of a country that is aside from the petty and unbalanced judgments is great both on an economic and a civic level. a good round so term economic is to be there. but it's not only italy that needs the e.u. the european union stability relies on the financial stability of its member to the south. but as italy keeps markets jittery greece looks on track for steady growth again in two thousand and seventeen the economy expanded by one point four percent this year the o.e.c.d. expects growth of two percent and given those figures athens could soon exit the international bailout program by the e.u. the european central bank and to the international monetary fund the current third aid package totals eighty six billion euros and it will run out in august two thousand and eighteen preliminar

is it italy leaving the euro area?think both of those concerns you mentioned, with euro concerns emerging in the last few days, with the chances of a finance minister, a emerging as a eurosceptic. that obviously didn't happen, but now the euro is in play here. to be the toply campaign issue in the next election. submerged in the election a couple of months ago, which was all about the populist parties attacks on immigration controls, trying to change some of them reforms under the previous government. the climate has changed quite dramatically. it is likely italy essentially will be having a referendum about the euro. mark: we are just hearing from the -- president who is convinced italy will continue and say it doesn't lie and financial markets. he says it deserves our respect. what are the populist proposing causing jitters with regards to the banking system? the fear is the new governments proposal could reverse years of effort to strengthen the banking system. what exactly are they proposing? talks have fallen apar

italy?livet questions, reflected in some of the strengths we are's -- all of that reflected in some of the strengths we are seeing in the japanese currency. what is going on with the turkish lira. the dollar is up by 2% against the turkish currency. there are a lot of questions. japanese trading is a big story. than thea bigger story general momentum low we are seeing in the turkish currency? manus: this is a witching hour discussion that has gone on. the lira has proven incredibly important. this has becomes one of those self-fulfilling stop-loss o rders, negative feedback loop, a justign -- is it really margin traders cutting their losses? these are the next positions. net positions. a brilliant line on the daybreak lead this morning. the risk is that the turks could machine-gun themselves in the foot. the risk of capital controls -- who is controlling the lira and the central bank? week,n said clearly last i will take the lead in terms of policy. if currency ever needed a bit of help from

not from only beer to italy but from africa. to europe. this gate arrived for lack of political governance in african. and for the lack of vision. of european leaders i remember the discussions with my colleagues in two thousand and fifteen when i was prime minister please halpert not italy please out of these people who died in the business see a woman who died in the sea pregnant they were egg their child to kill all who died in the sea. ok maybe i lost two pints. in the survey in the elections but i prefer save the human life the save the. two bites in my in the sun what would you do right now. i mean he's not does not mean i think everyone could arrive in italy i can see their priority blot the people in africa and give them the paternity to be able to create a new life in africa particularly because of their long and perspective what about now people coming to your country should they be sent their last period a lot of the number of migrants are. really. significantly descry is that so now the situation is absolutely by the past but i

that's italy's five star movement what started as a protest party. is now italy's next government. but are they up to the task. of five stars for rome. italy's populists reach for power. sixty minutes to go. on. in the white house. ground is shaking the. papers. in. turkey because the entire country champion. for the last sixty years. for mines. every journey begins with the first step and every language with the first word courage beneath. rico is in germany to learn german why not learn it simple online on your mobile and free. in w e learning course the german made. a low and welcome to this edition of focus on europe i'm brian thomas thanks so much for joining us it continues to present europe with new challenges one of the most contentious is how to handle the border separating northern ireland and the republic of ireland now some fear this issue could cause tensions to flare between protestant and catholic extremists beginning in jazz.

if this is the case we have a big problem in italy. it's called democracy this is not a free democracy. the league in five star parties had spent days drawing up a coalition pact aimed at ending a stalemate following inconclusive elections in march. their agenda is to tear up the political rulebook but they may have gone too far shoppers in rome seem to side with the president. i'm absolutely pro european and i believe that italy is connected and must have a connection with europe for our future. but you know sort of. an easy game at a certain point the president who looks after the constitution sees that things are moving in a direction that he doesn't want in my opinion he simply applied the constitution. some took the political turmoil with the sense of humor you know half a profit typical it's the same old mystery that we are totally and so it's normal we managed to get by so viva tahlia. if conoco to really is confirmed by a majority in parliament he will plan for new elections next year if he fails to go near enough support itali

of italy first. ok well assuming this coalition of extremes does manage to form a government what changes are italians like thing to see. but that italian newspaper put it this way this morning let's eat the cake we don't have the expectations very high of but nobody knows how the populace will finance the long wish lists they have put together in the coalition treaty they want it they want to tax reform they want most social benefit they have on crackdown on mike and save on you you treaties in favor of italy they're going to lose in the roots of fiscal policies so it's a very costly approach and nobody knows exactly how it should be financed about italians have high expectations because i've been fed up the old system this whole coalition is a protest against the whole system and now they talons white what will be delivered but you can see that it's the sixth. the fifth government in italy in the seventy three years since world war two so the lifespan of this government will also be short statistic

that the developments in italy's markets its bones and its economy. will become so far reaching that this might be signal to voters not to elect populists on the right and the left. a lot of to endure holding for a market shock that will persuade italians not to vote for the populace after all that's a big calculation. even now developments on bond markets the market value of banks and italy's economy in general have darkened noticeably and negatively. i get we think it. that has to do with the possible formation of a government i can only hope that this will play a role in the election campaign and send a signal not a time to populists on the left and right and the responsibility in government. and that was the is budget commissioner speaking exclusively to those statements really making waves there in italy where people do not like to be told how they should vote the reaction has been swift and it has been fierce has been a part of this was really like throw a can of oil into a campfire that's already sort of raging because acting as remarks were se

there is nothing new about political turmoil in italy. change in italy happens all the time.the move to euro skeptic politics, which has been happening. that raises questions about how strong the european foundations are. the u.k. position has always been they need reform. it is a difficult club to be a member of and you need reform. yvonne: most of the brunt will be focused on the italian banks, which hold a lot of that italian debt. is there a sense from the lenders that perhaps we have eliminated the systemic risk? perhaps they have cleaned house enough for them to whether these crisis? >> i think we have made banks stronger, they hold more assets andeir liabilities are understood. they have always had a quirky way of recognizing bad debt. they don't write them off in the same way as other european banks. that is what people are realizing. how long david: do you think people will be having this conversation david:? --david: how long do you think people are going to be having this conversation? italy, the u.k., so on and so forth. >> you have to remember that the u.s. took

we will respect everybody who put italy in the center . to the league and the five star movement spend two weeks hammering out a program it calls for the speedy deportation of half a million migrants costly campaign promises such as tax cuts early retirement and basic income are to be paid for with new debt. this contract is the heart of the government of change i see many people concerned about the international and european context they have nothing to fear the contract is the will of the italian people who want change. italy's european partners are alarmed the euro zone's third largest economy is already among the world's most indebted countries but the coalition hopes a political novice giuseppi will ease the concerns of italy's partners the law professor has been proposed as prime minister the two party leaders agreed on the unknown technocrat as a compromise for the top post now italy's president has to approve the new coalition's choice. l.-y. has loose talk about debts and plans to free of billions of euros for tax cuts and welfare

what about italy in a similar position. it away you just mentioned it what people alarmed about the situation in greece are the wider implications meaning that the crisis could spill over from greece to italy and other southern european countries so the worries were not so much about greece some five years ago worries will more about the fact that crises might spill over. into other markets like the tell you markets and in that sense we are now in that exactly that situation that we feared five years ago it was not exactly a spillover it's like a homemade crisis they are having internally now they cannot really attribute this to the situation in greece anymore but we are exactly in that situation which we actually feared five years ago that italy might go down the road and that italy might run into serious troubles and this is exactly what markets are currently simmering so i mean it is debt is huge and if it's silly. to be governed by an empty government collision or up after fresh elections perhaps a single party that is

move, drivenarket by -- is it all italy? mark: i think it may be italy. we maybe see a capitulation point in the market in the short term. the italian situation is a bit of a disaster. we said in new european crisis was coming because of italy, but it will be hard to trade this over the next few months. we don't know when early elections will come. probably the earliest would be september. a new government, october. it is likely populist's will gain support, we won't get that new fiscal plan that is negative for europe for many months. is veryugh the outlook negative, the risk for the euro is very real, it is hard to trade that bearish lead the next three months. i don't think this will be a one-way trade and it does look like this morning the price action is capitulation. the moves are incredible, given large moves yesterday. i could see a turning point today and rallying in trade today. move is pretty amazing. it dropped down to 116 flat and the chart is striking in the severity of the movement. italy, spain, portugal? are we in a eurocrisis again? mark

political risks spreading from italy to spain.reasuries catching a big bed. 30 year yields trading where 10 year yields were a week ago. the central bank finally stepping in, desperately trying to regain some credibility. we begin with a big issue, political risk in europe making a comeback. >> italy is the toughest call tactically here. in general, six to 24 months down the road is going to be -- >> not just because of the level, but because of the speed with which these assets every -- have re-priced. >> you don't have the vast pool of money coming in backstopping the bond market and keeping peripheral spreads from widening. >> the spreads widening from -- with italy relative to bunds, and that is having a contagion effect with some of the other peripheral markets. >> we prefer u.s. treasuries are -- or european sovereign bonds. >> italy has quite a lot of debt , but you have to look at the coupons of the bonds which are maturing and the coupons which they are going to replace. >> the europe story has run its course. there is a

actual will cause damage for italy.n thegoing to be beginning of this saga and there will be a lot more bunds on the road. manus: hold that thought. this chart,ing in the spacing of the banks this week. ago toto go back a year a conversation with one of our last guests. italy was in the midst of bailing out europe, and they created the backstop. we are panicking would be the theention at the start of week about banks, and we shouldn't, because the backstop is there, nothing to worry about. they have done that, but there is a limited amount they can do. once credit rating agencies put you under negative, you could statusinvestment-grade and the world will be getting rid of italian banks stocks. tremendous weight. it doesn't matter how big the markets are. move in onean direction in such a large amount that can overwhelm anyone. the entirely in corporate structure can go below investment grade and it can be a very serious situation. we saw that the word santa claus. we haven't seen that since the crisis. we saw the word p

what about italy in a in a similar position. in a way you just mentioned it what people alarmed about the situation in greece are the wider implications meaning that the crisis could spill over from greece to italy and other southern european countries so the words were not so much about greece some five years ago worries will more about the fact that crisis might spill over into other markets like the tell you markets and in that sense we are now in that exactly that situation that we feared five years ago it was not exactly a spillover it's like a homemade crisis they are having into now they cannot really attribute this to the situation in greece anymore but we are exactly in that situation which we actually feared five years ago that italy might go down the road and that italy might run into serious troubles and this is exactly what markets are currently observing so i mean it is debt is huge and if it's silly. to be governed by an ad to a government to coalition or after fresh elections perhaps a single party that is anti e

italy has been without a government since last march. >> this is the man to form italy's mandate government. -- this is the man with the mandate to form italy's government. >> a dialogue with europe to defend our interests is essential. we can do better than how we did in the past that it has to be a constructive dialogue fully acknowledging the members of the eurozone. >> after the coalition parties put forward a staunch euro skeptic is there finance minister, the president pulled the emergency brake. he rejected the formation of a new governmenent. it is the e establishment versus the new kids on the block in italian politics. the presisident try to keep at y what he considers to be dangerous populist politics. leaders ofof the coalition parts in turn accused the old guard to -- of acting auto graphically. >> it seems s that anyone e whos criticized europe is s considerd to b be no good asas a ministet. if this is t the case, we have a big problem in italy. it is c called democracy, this s not a free democracy. the league and five star parties have spent days drawing up the coalition pact

disadvantage for italy. ministers, but this is much more serious than that. an election later this year may become an unofficial referendum on italy's membership of the euro and on its place in the european union, that this country helped to create. james reynolds, bbc news, rome. what to make of it? justin urquhart stewart from seven investment management joins me now. good to see you. carlo cottarelli, another name we should probably not consign the memory banks for too long as the new prime minister.m remarkable, isn't it, when you actually think about what has happened here? here have an election that has thrown up the possibility for a government with two parties on the opposite extreme in this world, and despite their voting power, they cannot actually get a leader approved. mind you, it is probably just as well because i think it is fascinating to see, italy functions well despite its politicians, not because of its politicians, so it can carry on in this way for some time. i suppose that is going to

in italy as well.look at the industry groups that are rising and falling across the continent right now. the only real loser you can see is a derail's.it looks -- is materials. it looks like you have health care, energy, i.t., financials, consumer staples, consumer discretionary all gaining today. the question will be what are the individual winners and losers that you can see on the stocks x hundred -- on the stoxx 600. we can see what the big movers are that are adding or subtracting points from the indexes. unicredit you see on the top. an italian bank up almost 4% this morning. talk about a dead cat bounce. that is a recovery rally. ntander on topsa as well. it is a spanish bank that looked really red on friday and is rarely green today. b.n.p. paribas also at the top. lbao.nz, bangco bi you see all the banks in the first seven games on the stoxx 600 today. and you see enel. that is an interesting story that could type in to the cte -- the zte story. take a look at some of the losers today on this

we look at why italy's political trouble has spooked investors. and the racist tweet from roseanne barr that prompted abc to cancel its biggest hit of the season. more on that coming up. first, our top story, live from paris. we will go back to belgium nono, where the man behind tuesday's fourthkilled actually a person one day before the rampage in liege. the belgian prime ministers said the attacker killed a former prison inmate by hitting him in the head before shooting dead two police officers and a civilian. it turns out the attacker was a prison inmate himself, and known to be radicalized, and yet was still let out on authorized leave. the is more from investigative team that says it is treating the murders as a terror attack. >> the first elements of the investigation showed that it might be a terrorist attack. these first elements have to be understood as a modus operandi shown on the internet by i.s. in their video messages. .ttack police with a knife the perpetrator of course in touch with radicalizized person. qualifies as terrorist murd

italy's president appoints an interim government headed by an ex i.m.f. official that amid calls for him to be impeached after he rejects that would be coalitions euro skeptic. minister i'm wondering if we are in a democracy and if it's a new talents to solve this is the actual point i have a great problem in italy. as the u.k. condemns israel's actions against palestinian protesters it's been revealed that british firms are selling record numbers of weapons to tel aviv and also to come we speak to a black activist stabbed in the n.r.c. rally in the u.s. who says that police were trying to press charges against him. but i welcome it's two pm here in moscow you're watching international our top story this hour's breaking news because italy's president has just appointed an interim prime minister former international monetary fund official locata really does come after sergio. rejected the center right coalition's pick for the post of economy minister citing his euro skepticism as the reason why the new interim prime minister's government will still need to

was on a disastrous course he said in a tweet i needed to save italy he had to save italy and this man savant as you mentioned deeply opposed to the european union and the euro did brussels play any kind of role in getting his nomination overturned. of course not officially however we known for days that there were warnings and when several know was nominated we've heard the french finance ministers we heard several high officials in brussels sort of with warnings and saying don't do that you have to stick to the rules and sort of stay within the framework of the european contracts and don't do anything rash because everybody knows italy is one of the most indebted countries in the world hundred thirty billion euros public debt and that is such a huge mountain of money that everybody knows that if he would really go rogue it could bring down the whole european union and could bring down the whole euro zone so brussels was quite scared and of course there have been contacts behind the scenes as usually happen in those situations uncertainty there barbara potentially further on certainty

general elections the forming of a populist government begins to look more and more likely what italy needs is a stability and a sound plan that will put its finances back on track also coming up it's one of the biggest e-commerce acquisitions in history wal-mart buys into an online retailer flipkart to gain access to the indian market. welcome to the business i want to get johns and berlin as always good to have you with us i'm starting with a question that's on many europeans minds will there be fresh elections in italy after the last vote in march ended in a hung parliament followed by two months of political deadlock or will europe's third largest economy get an empty stopper shouldn't anti euro and anti austerity government or right now the chances of a populist government running it in the are looking more and more likely a prospect that not only alarms investors but also many ordinary italians. furby archer phoneys day begins very early he sets off for two in the morning while the rest of rome sleeps. the greengrocer got used to it a long time ago what really bothers him is the