Italian bonds have soared passed the so-called “unsustainable” 7% barrier and it looks increasingly certain that Italy, the eighth largest economy in the world, will need a bailout.

The announcement that Italian Prime Minister, Silvio Berlusconi, will step down upon the agreement of fresh austerity measures, has failed to stabilise confidence among the markets.

"I will resign as soon as the [budget] law is passed, and, since I believe there is no other majority possible, I see elections being held at the beginning of February and I will not be a candidate in them," stated Mr. Berlusconi to Italian newspaper, La Stampa.

The yield on Italian bonds breached 7.4% from 6.8% in just one hour, with the main index in Milan trading at over 3.5% lower, with shares in Mr. Berlusconi’s Mediaset company plummeting almost 10%.

If Italy was to pay 7% interest on all its €1.9 trillion debt, it would add a staggering €70 billion a year bill.

However, Italy’s problem is that the bailout fund Europe has set aside is simply not big enough to cope with the levels of debt Italy currently has.

Christine Lagarde, International Monetary Fund chief, has cautioned that the global economy is facing a “lost decade”, a period of practically no economic growth worldwide due to mounting financial uncertainty. Ms. Lagarde has also advised stable Asian nations to properly safeguard their own economies against further downturns.

Barclays has already stated that Italy is now “mathematically beyond the point of no return”, while Kathleen Brooks (research director at Forex) believes that the market is reacting to the possibility that a new coalition in Italy could worsen their situation.

Ian McCafferty, chief economist at the Confederation of Business Industry (CBI), said problems in Europe mean economic uncertainty has grown and the outlook for next year is “significantly weaker”.

“We still think we can avoid a double-dip recession, but the risks have increased,” he said.

With Greece on its knees, Portugal continuing to struggle and Spain do everything it can to stave off low confidence in the market, Europe is looking to Ireland to show the way.

Ireland is sticking to its agreement, no matter how harsh or unpopular it is. It is bringing its debt back into line and, while recovery is slow, it is evident.

Europe can cope with an Italian bailout but if Spain falls, the euro falls and that bodes ill for all concerned. The world must hope that Europe does not make a P.I.I.G.S. ear of the economy at such a crucial stage.

Paddy Irishman, Paddy Portuguese, Paddy Italian and Paddy Greekman walk into a bar. Who pays the first round? Herr German.

It may sound like a bad joke but that is the reality of the current economic situation in Europe. As they say, half joke and all in earnest.

The Minister for Finance, Michael Noonan, is of the American way of thinking. They attempted to stop the collapse of financial institutions by taking huge stakes in companies such as AIG, various different businesses in the automotive industry, as well as completely buying out Fannie Mae and Freddie Mac.

Mr. Noonan believes that a similar approach will work in Europe. He told the European Central Bank (ECB) that they must keep buying up Italian and Spanish bonds, as to reassure the markets that neither will need a bailout. If Italy goes, Europe may limp on. If Spain goes, it’s the end of the euro and the end of Europe as we know it.

The US is able to get away with throwing money at a problem because its pockets are limitless. Their Federal Reserve buys all the bonds it issues and worries about inflation further down the road. Technically, Europe could do the same thing to allay fears of default (the ECB has €3 trillion in reserve, according to US banking giants Citi).

Currently, the ECB can’t buy member states’ bonds directly and would need to change their own regulations to do so, a measure they don’t seem willing to do yet.

The US Treasury and the Government work hand in hand to ensure the best outcome for both parties, as the Government will try their utmost to repay loans, because fiscal union is in both their interests.

This is not so with the ECB and some indebted EU nations.
Greece, and to a lesser extent Italy, maybe out of necessity rather than nonchalance, have shown domestic problems overshadow ECB repayment. This leaves better-prepared countries i.e. Germany to foot the bill.

One can understand the hesitancy of countries like China or Brazil or any of the G20 to contribute to an emergency, when the ECB are unwilling to release some of its €3 trillion reserve because it’s afraid of inflation.

Europe wants to share other countries’ sweets without opening the ones they have first. On the other hand, should a country like China or Brazil contribute when the Germans won’t?

The choice is simple, let Italy, Spain and then ultimately, the euro, go to the wall or debase the ECB. Doing nothing is no longer an option. All eyes will be on German Chancellor, Angela Merkel, as it seems that all roads do lead to Germany.

Intrum Justitia assist clients with legal collection in cases where amicable collection efforts have proved fruitless. Our debt management services are only available for companies in the Republic of Ireland.

To get the best results for  clients Intrum advise them to take fast action, the earlier the better and obviously, disputed debts deliver the poorest results.

Are you a small or medium sized company that needs a fast and simple web based service to solve an unpaid invoice legally? Especially for you Intrumhave 3 on-line solutions for very competitive prices.

For clients you would like to keep if possible but you are struggling to get paid, see offer 1

1. Legal demand only, price € 49.50, excluding 21% VAT

You just have to fill out the debtor placement form and email it back toIntrum Intrum will inform you about the costs and  proceedings. Read more about Legal demand.

For clients where you just want to get paid, see offers 2 and 3.

2. Legal demand and proceed to judgement, price from € 150,– to € 400,–, excluding 21% VAT

After filling out and emailing the debtor placement form, Intrum will take immediate action and give you solid advice regarding proceding to court or otherwise solve the case. In this situation it is vital to balance the costs against the expected outcome. Read more about proceed to judgement.

3. Subscription lettering service, price from € 150,– to € 300,–, excluding 21% VAT.

Intrum have priced the three services very keenly versus the market place…especially the legal offerings but  would like to offer all the services at a 20% discount to the advertised price on our website to QBA members throughout Ireland.

This would effectively be 40 / to 50%  cheaper than most other major players in the debt management market.

Contact :

Phone: 01 869 2222 / 087 7660553 or email  at  g.barrett@ie.intrum.com

Paschal Walsh, CMO Credit Management

Practical Tips for Good Credit Management

Credit management is a complex, continuous and crucial part of business. A clearly defined and structured approach to credit management is required for successful management of the debtor’s ledger.

The needs and structure of each business varies therefore the customer relationship management will vary depending on the circumstances and customer base of the business concerned nevertheless every business must no matter what size it is be in control of it’s debtor accounts.

Good customer information and transaction documentation combined with a proactive action plan to achieve timely payment of invoices will ensure the delivery of positive cash flow to the business and good credit management is critical in this process.

Terms and conditions of sale should be:

(i) In writing.
(ii) Contain reference to retention of title if appropriate.
(ii) Signed by or delivered by registered post to the customer.
(iv) Reviewed by your solicitor to ensure that they are consistent with your business sector and current legislation needs.
(v) Referred to or copied on order forms, delivery dockets, invoices and statements.

Credit Application Form (every new customer should complete a credit application form detailing):

(i) Type of entity sole trader, partnership or limited company including registered number.
(ii) Name address phone fax email and mobile number of customer business and contacts.
(iii) Details of authorised individual within the new customer business and authority level they have.
(iv) A description of the new customers business and length of time in business.
(v) 2 to 4 trade references and bank details to take up references from these sources.
(vi) The amount of credit sought / required by the new customer and credit terms requested.
(vii) Confirmation whether any of the parties in the business have been involved in another business in last 5 years.
After a credit worthiness evaluation has been carried out a credit limit and terms of payment should be set and communicated to the customer by registered post, if appropriate the customer should be asked to sign a personal guarantee.
if the customer’s business circumstances dictate that this security is necessary!

When trading commences the following procedures should be in place for all transactions:

(i) Ensure order forms and delivery dockets are signed.
(ii) Ensure administration system allows easy matching of order forms, delivery dockets and invoices.
(iii) Ensure invoices are raised promptly, accurately and in as much detail as possible.
(iv) Issue monthly statement by post and/or fax /email within the first week after each month end (Monthly statements should include a remittance slip that the customer can return with their payment indicating the invoices they are paying).
(v) Monies received and credit notes issued should be applied to specific invoices as directed or agreed, where no remittance is provided the customer should be contacted and the allocation of the payment / credit should be mutually agreed so that the ledgers on both sides agree.

4. Pursuing invoice payment:

Amounts overdue for payment should be readily identifiable from your accounts system i.e. by production of an aged debtors listing and accounts that fall into the seriously overdue category should have their terms reviewed and altered.

The following is a sequence of actions that should be taken to achieve prompt payment of invoices, some of these may be used in combinations that best suit your business structure.

(A) Prior to the invoice due date telephone the customer, confirm safe receipt of goods / services, satisfaction with supply, obtain an agreed commitment to pay by a fixed date and by an agreed method i.e. cheque, EFT etc.
(B) Send standard reminder letter(s) setting out consequences of late payment for customer i.e. late payment interest, curtailment or withdrawal of credit facilities etc.
(C) When a breach of agreed terms occurs the customer should be advised in writing that this will affect future credit terms, may impact of retention of title, and details of any additional liability they will have to incur for collection costs etc. should be provided to encourage the customer to comply with and adhere to the agreed terms of credit.

We now operate in a less forgiving credit world where those with better credit policies and procedures succeed most.