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Following the stalemate of the recent elections, in a rare move the Italian president has controversially used his veto to deny a eurosceptic the position of Finance minister, citing “concerns from investors” leading to a breakdown in talks to finally form a government.
This had led to calls for the presidents impeachment.
To add to this the president has appointed an economist from the IMF as PM to form a government.
What a mess.
How did we get to the point where financial institutions can dictate to presidents who should or should not be appointed ministers following elections?
The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.
Democracy once again being ignored by pro EU politicians and members of financial institutions.
Snap elections in Sept/Oct will lead to a greater populist vote after the Italian people have now witnessed how the Pro EU politicians want to ignore them and democracy.
305 AFLI
[Post edited 28 May 2018 17:48]
OUT AFLI SUCK IT UP REMOANER LOSERS
🇬🇧 🇬🇧 🇬🇧 🇬🇧 🇬🇧 🇬🇧 🇬🇧 🇬🇧 🇬🇧 🇬🇧 🇬🇧 🇬🇧 🇬🇧 🇬🇧 🇬🇧
Trouble brewing in Italy? on 17:44 - May 28 by JACKMANANDBOY
Italian politics - Where do you start?
Same old story. There have been Mafia linked politicians, Bonga Bonga parties and now populists who live for the sound bite. Probably better off being governed by the boring technocrats.
typical of Italy in the past - the ironic thing is the EU had created the possibility for stability and the Euro has helped Italy become solvent. Intersting is neither coalition partner likes the other and neither are strongly anti-EU. Some in 5Star want out of the Euro but Lega Nord want out of Italy which would take the prosperous areas away from the 5Star supporting Rome and Southern Italy. Italy has only been a country for about 150 years but is another country who think thy are owed an Empire. What worries me is the last time Europe has 3 major fascist countries was in the 1930 - we have far more deadly weapons these days.
Carlo Cottarelli has been named Italy's new Prime Minister Credit: AFP Italy’s pro-euro elites have overreached disastrously. President Sergio Mattarella has asserted the extraordinary precedent that no political movement or constellation of parties can ever take power if they challenge the orthodoxy of monetary union.
He has inadvertently framed events as a battle between the Italian people and an eternal ‘casta’ with foreign loyalties, playing straight into the hands of the insurgent Five Star ‘Grillini’ and anti-euro Lega nationalists. He unwisely invoked the spectre of financial markets to justify his veto of euroscepticism. Taken together, his actions have made matters infinitely worse.
Risk spreads on 10-year Italian bonds jumped almost 30 basis points to a four-year high of 235 on Monday as investors woke up the horrible implications of constitutional convulsion: a rolling crisis through the summer that can only end in fresh elections that resolve nothing.
Much had been been made of falling bank bank equities over recent days. They are falling even harder now. Banca Generali was down 7.2pc, and Unicredit down 5pc.
Italian President Sergio Mattarella welcomes Carlo Cottarelli (right) at the Qurinale presidential palace in Rome after giving him mandate to form a government Italian President Sergio Mattarella welcomes Carlo Cottarelli (right) at the Qurinale presidential palace in Rome after giving him mandate to form a government Credit: AFP Whether or not it is a ‘soft coup’, it is certainly dangerous territory. President Mattarella stated openly that he could not accept the Lega-Gillini finance minister - Paulo Savona - because his past criticisms of the euro “could provoke Italy’s exit from the euro” and lead to a financial crisis.
In one sense, this veto should have been expected. The Berlusconi government was toppled in 2011 by Brussels and the European Central Bank. Whistleblowers have since revealed that they manipulated bond spreads to exert maximum pressure. The EU even tried to recruit Washington. The US refused to help. “We can’t have blood on our hands,” said the US Treasury Secretary, Tim Geithner. What is new is that euro sanctity should be formalized as an Italian constitutional imperative.
“We have a problem with democracy because the Italian people are sovereign and they cannot be ruled by spreads,”said Matteo Salvini, the strongman of the ascendant Lega. “ It is a very serious matter than Mattarella chose the markets and EU rules over and above the interests of the Italian people.”
“Why don't we just say that in this country it's pointless voting, since it is the ratings agencies and the financial lobbies who decide the governments?" Luigi di Maio, the leader of the Five Star Movement.
President Mattarella has certain powers under the Italian constitution but they are mostly untested and in a grey area. He can make a case that the Lega-Grillini fiscal blitz violates Article 80, and that he has a duty to safeguard the EU treaties. Yet he has no direct mandate from the people. He was picked as low-profile compromise in a backroom deal. He has no have a blanket authority to lock Italy into the euro in perpetuity.
Mr di Maio is now leading calls for his impeachment under Article 90. "I want the president to be put on trial. I want this institutional crisis to be settled by parliament to avoid popular discontent getting out of hand,” he said. The insurgents have the votes to remove him.
What is remarkable is that pro-EMU elites have acted so crudely and pushed matters to such a dangerous impasse. The proposed finance minister was not a hot-head. Mr Savona was a former official at the Bank of Italy, a former minister, and a former chief of the industry lobby Confindustria, as well as directing a London hedge fund.
He had made conciliatory noises, dropping past suggestions that the euro was a “German cage”. He insisted that his 2015 ‘Plan B’ to leave the euro was no longer operative and that his real objective was to return to a fairer euro, rooted in Article 3 of the Lisbon Treaty calling for economic growth, jobs, and solidarity. His legal arguments were impeccable.
With a little subtlety, Italy’s ‘poteri forti’ and the mandarins could have worked with Mr Savona and found a way to soften the hardline agenda of the Lega-Grillini. That was almost certainly their instinct. The push to exclude him altogether - and in doing so to try to smother of the eurosceptic rebellion, as they smothered Syriza in Greece - came from Berlin, Brussels, and the EU power structure. Time will tell whether they blundered into a trap.
“In a way I am very happy because we have finally wiped the bull**** off the table,” said Claudio Borghi, the Lega’s economics spokesman. “We now know that it is a choice between democracy or comfortable bond spreads. You have to swear allegiance to the god of the euro in order to be allowed to have a political life in Italy. It worse than a religion."
"What we are seeing is the fundamental problem with the eurozone construction; You can't have a government that displeases the markets or the spread club. The ECB and the Eurogroup will use this to crush your economy. You are very lucky in the United Kingdom that you still live in a free country,” he said.
President Mattarella has picked Carlo Cottarelli - an IMF-veteran and a symbol of austerity - to form a technocrat government. This desperate venture has no chance of winning a vote of confidence in the Italian parliament. It will exist in constitutional limbo. “It is incredible that they are even trying to do this. It is going to lead to riots and mass political protest. The vast majority of Italians don't give a damn about spreads any longer,” said Mr Borghi.
The calculus of those around the president is that chastened Italians may change their minds as they look into the financial and political abyss and recoil from insurgency. The bet is that political attrition will reshape the landscape by October, deemed the mostly month for a fresh vote. This may succeed but it is a dangerous assumption.
The Lega’s Matteo Salvini has already gained eight points in the polls since the last election. He has seized on events of the last 24 hours to capitalize on the heady nationalist mood, like Gabriele d’Annunzio at Fiume in 1919. “We will never be serfs and slaves of Europe,” said Mr Salvini.
He has already proclaimed that the next vote will be a plebiscite on Italian sovereignty, and an act of national resistance against “ Merkel, Macron, and the financial markets”.
But there is another danger. Capital flight has its own relentless logic. It visible in the surging exchange rate of the Swiss franc. There is a risk that outflows will accelerate and push the internal Target2 payment imbalances of the European Central Bank towards breaking point.
The Target2 credits of the German Bundesbank are already €923bn. They are likely to blow through €1 trillion in short order, prompting loud demands from Berlin for a freeze. The IFO Institute in Germany has already warned that there must be limits. Any move to restrict liquidity flows would signal that Germany is close to pulling the plug on monetary union and would set off an unstoppable chain-reaction.
Mr Mattarella faces a gruelling summer. He risks ending ending with exactly the same Lega-Grillini alliance in four months, with an even bigger majority and a thunderous mandate for their “government of change”.
He may go the way of France’s legitimist president Patrice de MacMahon, who tried to impose his government “Moral Order” on a hostile Chambre des Deputies in the 1870s by invoking his theoretical powers under the Third Republic. The bid failed. Parliament confronted him with an ultimatum: “submit or resign”. Democracy prevailed.""
0
Trouble brewing in Italy? on 22:44 - May 28 with 2718 views
Carlo Cottarelli has been named Italy's new Prime Minister Credit: AFP Italy’s pro-euro elites have overreached disastrously. President Sergio Mattarella has asserted the extraordinary precedent that no political movement or constellation of parties can ever take power if they challenge the orthodoxy of monetary union.
He has inadvertently framed events as a battle between the Italian people and an eternal ‘casta’ with foreign loyalties, playing straight into the hands of the insurgent Five Star ‘Grillini’ and anti-euro Lega nationalists. He unwisely invoked the spectre of financial markets to justify his veto of euroscepticism. Taken together, his actions have made matters infinitely worse.
Risk spreads on 10-year Italian bonds jumped almost 30 basis points to a four-year high of 235 on Monday as investors woke up the horrible implications of constitutional convulsion: a rolling crisis through the summer that can only end in fresh elections that resolve nothing.
Much had been been made of falling bank bank equities over recent days. They are falling even harder now. Banca Generali was down 7.2pc, and Unicredit down 5pc.
Italian President Sergio Mattarella welcomes Carlo Cottarelli (right) at the Qurinale presidential palace in Rome after giving him mandate to form a government Italian President Sergio Mattarella welcomes Carlo Cottarelli (right) at the Qurinale presidential palace in Rome after giving him mandate to form a government Credit: AFP Whether or not it is a ‘soft coup’, it is certainly dangerous territory. President Mattarella stated openly that he could not accept the Lega-Gillini finance minister - Paulo Savona - because his past criticisms of the euro “could provoke Italy’s exit from the euro” and lead to a financial crisis.
In one sense, this veto should have been expected. The Berlusconi government was toppled in 2011 by Brussels and the European Central Bank. Whistleblowers have since revealed that they manipulated bond spreads to exert maximum pressure. The EU even tried to recruit Washington. The US refused to help. “We can’t have blood on our hands,” said the US Treasury Secretary, Tim Geithner. What is new is that euro sanctity should be formalized as an Italian constitutional imperative.
“We have a problem with democracy because the Italian people are sovereign and they cannot be ruled by spreads,”said Matteo Salvini, the strongman of the ascendant Lega. “ It is a very serious matter than Mattarella chose the markets and EU rules over and above the interests of the Italian people.”
“Why don't we just say that in this country it's pointless voting, since it is the ratings agencies and the financial lobbies who decide the governments?" Luigi di Maio, the leader of the Five Star Movement.
President Mattarella has certain powers under the Italian constitution but they are mostly untested and in a grey area. He can make a case that the Lega-Grillini fiscal blitz violates Article 80, and that he has a duty to safeguard the EU treaties. Yet he has no direct mandate from the people. He was picked as low-profile compromise in a backroom deal. He has no have a blanket authority to lock Italy into the euro in perpetuity.
Mr di Maio is now leading calls for his impeachment under Article 90. "I want the president to be put on trial. I want this institutional crisis to be settled by parliament to avoid popular discontent getting out of hand,” he said. The insurgents have the votes to remove him.
What is remarkable is that pro-EMU elites have acted so crudely and pushed matters to such a dangerous impasse. The proposed finance minister was not a hot-head. Mr Savona was a former official at the Bank of Italy, a former minister, and a former chief of the industry lobby Confindustria, as well as directing a London hedge fund.
He had made conciliatory noises, dropping past suggestions that the euro was a “German cage”. He insisted that his 2015 ‘Plan B’ to leave the euro was no longer operative and that his real objective was to return to a fairer euro, rooted in Article 3 of the Lisbon Treaty calling for economic growth, jobs, and solidarity. His legal arguments were impeccable.
With a little subtlety, Italy’s ‘poteri forti’ and the mandarins could have worked with Mr Savona and found a way to soften the hardline agenda of the Lega-Grillini. That was almost certainly their instinct. The push to exclude him altogether - and in doing so to try to smother of the eurosceptic rebellion, as they smothered Syriza in Greece - came from Berlin, Brussels, and the EU power structure. Time will tell whether they blundered into a trap.
“In a way I am very happy because we have finally wiped the bull**** off the table,” said Claudio Borghi, the Lega’s economics spokesman. “We now know that it is a choice between democracy or comfortable bond spreads. You have to swear allegiance to the god of the euro in order to be allowed to have a political life in Italy. It worse than a religion."
"What we are seeing is the fundamental problem with the eurozone construction; You can't have a government that displeases the markets or the spread club. The ECB and the Eurogroup will use this to crush your economy. You are very lucky in the United Kingdom that you still live in a free country,” he said.
President Mattarella has picked Carlo Cottarelli - an IMF-veteran and a symbol of austerity - to form a technocrat government. This desperate venture has no chance of winning a vote of confidence in the Italian parliament. It will exist in constitutional limbo. “It is incredible that they are even trying to do this. It is going to lead to riots and mass political protest. The vast majority of Italians don't give a damn about spreads any longer,” said Mr Borghi.
The calculus of those around the president is that chastened Italians may change their minds as they look into the financial and political abyss and recoil from insurgency. The bet is that political attrition will reshape the landscape by October, deemed the mostly month for a fresh vote. This may succeed but it is a dangerous assumption.
The Lega’s Matteo Salvini has already gained eight points in the polls since the last election. He has seized on events of the last 24 hours to capitalize on the heady nationalist mood, like Gabriele d’Annunzio at Fiume in 1919. “We will never be serfs and slaves of Europe,” said Mr Salvini.
He has already proclaimed that the next vote will be a plebiscite on Italian sovereignty, and an act of national resistance against “ Merkel, Macron, and the financial markets”.
But there is another danger. Capital flight has its own relentless logic. It visible in the surging exchange rate of the Swiss franc. There is a risk that outflows will accelerate and push the internal Target2 payment imbalances of the European Central Bank towards breaking point.
The Target2 credits of the German Bundesbank are already €923bn. They are likely to blow through €1 trillion in short order, prompting loud demands from Berlin for a freeze. The IFO Institute in Germany has already warned that there must be limits. Any move to restrict liquidity flows would signal that Germany is close to pulling the plug on monetary union and would set off an unstoppable chain-reaction.
Mr Mattarella faces a gruelling summer. He risks ending ending with exactly the same Lega-Grillini alliance in four months, with an even bigger majority and a thunderous mandate for their “government of change”.
He may go the way of France’s legitimist president Patrice de MacMahon, who tried to impose his government “Moral Order” on a hostile Chambre des Deputies in the 1870s by invoking his theoretical powers under the Third Republic. The bid failed. Parliament confronted him with an ultimatum: “submit or resign”. Democracy prevailed.""
Re: "The Target2 credits of the German Bundesbank are already €923bn. They are likely to blow through €1 trillion in short order, prompting loud demands from Berlin for a freeze. The IFO Institute in Germany has already warned that there must be limits. Any move to restrict liquidity flows would signal that Germany is close to pulling the plug on monetary union and would set off an unstoppable chain-reaction."
Here is quite a good Youtube video about the Target2 Euro payments system. (Just skip the ads)
Essentially because Germany runs massive trade surpluses with rest of the Eurozone - Italy and Spain combined are in hock to Germany somewhere between €800bn and €900bn.
So will Germany keep supporting Italy as the size of these Target2 credits keep increasing - especially if there is a chance that Italy could pull out of Monetary Union.
-1
Trouble brewing in Italy? on 23:43 - May 28 with 2651 views
So..the choice is between the following candidates..
-Belusconi,The guy who slept with a 16 years old stripper and then literally said "at least I'm not gay",has ties with the mafia,willing to sell all his "principles" and ally himself with any party for a senior position as long as they're winning (he allied himself with Centre Left Democrats in the past,this year he ran with the Far Right)..next..
or
-Salvini,who is a self proclaimed fascist and white supremacist,the one who calls women he doesn't like "sex dolls",called to ban Frozen 2 if the character Elsa is a lesbian (yeah that actually happened),called to bomb refugee boats. And when one of his benevolent supporters shot 7 black guys in the town of Macerata,he had the audacity to blame the Centre-Left for letting black people in the country.A man who has to be the biggest repugnant c*nt that ever breathed..next..
-5 Stars Movement..I very much doubt anyone knows what the hell do these people really want..hell I doubt they even know what they want..Every politician in their ranks have completely contradictory agendas it's really insane..Grillo is far-right,Di Maio is kind of a pro-EU centrist,while Roberto Fico who is the President of the Chamber of Deputies is practically a pro-EU Centre-Leftist..1/3 of Italians voted for a party without an ideology..next..
-Democrats..Well even the nice guys in this country are corrupt,astute and weak. At least they're not as scummy as the others..
Conclusion:I've lived in Italy for many years in my life,And from experience and knowledge,It's practically an another 3rd world country like Russia or Turkey..Not really worth overthinking about their politicians who are less coherent and as ridiculous as Kindergarten kids..
Trouble brewing in Italy? on 22:13 - May 28 by Badlands
typical of Italy in the past - the ironic thing is the EU had created the possibility for stability and the Euro has helped Italy become solvent. Intersting is neither coalition partner likes the other and neither are strongly anti-EU. Some in 5Star want out of the Euro but Lega Nord want out of Italy which would take the prosperous areas away from the 5Star supporting Rome and Southern Italy. Italy has only been a country for about 150 years but is another country who think thy are owed an Empire. What worries me is the last time Europe has 3 major fascist countries was in the 1930 - we have far more deadly weapons these days.
'The ironic thing is the EU had created the possibility for stability and the Euro has helped Italy become solvent. '
Italy? Solvent?
If Italy got any more insolvent than it is already it would make the clowns who have got this country into £1.7 trillion worth of debt look like economic geniuses for keeping our debt down to just the £1.7 trillion and rising.
1
Trouble brewing in Italy? on 11:13 - May 29 with 2466 views
Trouble brewing in Italy? on 00:06 - May 29 by BarrySwan
'The ironic thing is the EU had created the possibility for stability and the Euro has helped Italy become solvent. '
Italy? Solvent?
If Italy got any more insolvent than it is already it would make the clowns who have got this country into £1.7 trillion worth of debt look like economic geniuses for keeping our debt down to just the £1.7 trillion and rising.
I know some are totally clueless
Italy debt to gdp 132%
Spain. 99%
UK 82%
Germany 68%
OUT AFLI SUCK IT UP REMOANER LOSERS
🇬🇧 🇬🇧 🇬🇧 🇬🇧 🇬🇧 🇬🇧 🇬🇧 🇬🇧 🇬🇧 🇬🇧 🇬🇧 🇬🇧 🇬🇧 🇬🇧 🇬🇧
Picture the scene. It’s 7th May 2022. The nation awakes to the news of a landslide labour victory. Corbyn is pictured outside momentum HQ, jubilantly waving his Zimma frame in the air. Diane Abbott has not yet been seen. It’s rumoured she’s still in Hackney town hall, trying to figure out if the 27564 votes she received is more or less than the 7047 votes her opponent received. Her celebrations will start later.
The British media are an a frenzy as helicopter footage follows corbyns motorcade from above as it winds its way towards Buckingham palace. Finally stepping out of his 1972 Morris minor on the steps of buck house he gives one triumphant wave to his adoring, slightly gormless and filthy looking fans outside the gate, before sweeping over the threshold.
An hour passes, two hours. No sign of our hero. Suddenly the balcony door opens and the frail silhouette of Queen Elizabeth II emerges. Now over 100 she descends from the balcony on a gold plated Stena stairlift whilst the scurrying media announce she’s to make a speech.
“On advice of financial institutions around the world and for the good of the economy One has refused permission for Mr Corbyn to form a government. One has also sent for him to be executed immediately and the bill for de-lousing my palace is to be paid for by his relatives. In the meantime One has appointed a Mr Blair to run the country, as he has shown remarkable knowledge of economical affairs.”
The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.
Just read a piece in the FT - because of the way Italian Banks invest people's money (bonds rather than markets for greater security) - leaving the € would hit the ordinary people in the pocket immediately. Not cost of living levels but entire savings and mortgages would (not could) disappear overnight. The president also argues that Italy's debt 136% is so low because the Eurozone provides loans cheaper than possible anywhere else and he was using that saving to chip away at its national debt when in office. A very silly move by the coalition as they will almost certainly be involved in another election that focuses on the economy and make the campaigning of the Legal Nord and 5Star extremely vicious. These two groups are like chalk and cheese - Nord could develop outside the € but Rome and the South would crumble to pre-EU standard of high levels of subsistence living and valueless property. While supporters of anti-governemnt will point the finger at the President it is worth remembering the proposed finance minister is an unelected amateur and the two sides of the coalition are so different they could split at a moments notice. Should the president have allowed that to happen or intervene in a way that protects the whole of Italy? Who knows!
"In such circumstances the so-called “doom loop”, whereby impairment of sovereign debt infects the solvency of the banking system through its holdings of Italian Treasuries, would soon return. Already there is evidence of capital flight, forcing Italian banks to draw ever more heavily on central bank liquidity. This in turn increases the size of the potential liability in surplus nations such as German and the Netherlands. Alarm bells are ringing loud in Frankfurt, where the Bundesbank Target 2 balance will shortly breach the €1 trillion (£870bn) mark. In the event of a collapse in the single currency, this money would be lost to Germany, the greatest wipeout of middle class savings since the Second World War."
"The way things are going, Italy could be out of the European Union before Britain
Italy Italy has been plunged into turmoil with new elections expected “Last night was the darkest in the history of Italian democracy”, Luigi Di Maio, head of Italy’s populist Five Star Movement, said on Monday. For once, this was not just Italian hyperbole. He’s right, but not entirely for the reasons he meant.
It is indeed a profoundly threatening moment, not just for modern Italy, but for the European Union as a whole. Not because the Italian president, Sergio Mattarella, has ridden rough-shod over democratic convention by blocking the appointment of a eurosceptic finance minister, or because he has turned to Carlo Cottarelli, a former big wig at the International Monetary Fund, to form a caretaker government; something similar has happened before in the bedlam of Italy’s political circus.
Rather, it is because the current, incendiary confluence of political, financial and economic forces is a much more dangerous mix than anything we have seen before in the single currency’s troubled, near twenty-year history, threatening to blow the whole thing apart from within.
It is impossible to imagine the euro, once the rebellious Italians have been cut loose, sailing on regardless as if nothing had happened.
If Berlin honestly believes this, then it is living in a parallel universe. The loss to creditor nations — of which Germany is by far the largest — would in itself set in train a whole sequence of political uprisings. And if it is the end of the eurozone, it is also curtains for the European Union.
Italy remains without a government as Conte quits
h
This might be regarded as cause for celebration among some eurosceptics. Brexiteers think of it as vindication of Britain’s decision to leave. They should be careful what they wish for; the political, financial and economic fallout from a disorderly unraveling of Europe’s post-war settlement would make the financial crisis look but a stroll in the park by comparison.
Italy’s populist leaders shake their fists at the widening spreads, as if they were the very personification of the establishment conspiracy routinely blamed for all the ills of the world. True enough, Europe’s political elites have given them plenty of reason to think it. “The markets will teach the Italians to vote for the right thing”, Günther Oettinger, European Commissioner for Budget and Human Resources, commented earlier today, as if deliberately shooting himself in the foot. If he had casually opined that all Italians were lousy footballers, he could scarcely have said something better designed to incite.
League's Matteo Salvini, interim prime minister Carlo Cottarelli and Five Star's Luigi Di Maio But markets have of course never been at the beck and call of the politicians, neither those who want Italy to be punished for voting the “wrong way”, or those who habitually harang the financiers of London and New York for failure to do their bidding or bankroll their hair-brained policy initiatives. Rather, they are governed by the self interest of millions of investors and money managers.
And what they see is an environment about to turn entirely hostile to wealth preservation and growth, a situation which is politically much more serious than the Red Brigades in the Seventies, when the middle classes were united against the violence, and far more dangerous financially than the height of the eurozone crisis under Silvio Berlusconi, when technocratic government was allowed to step into the breach to calm things down. The populists perfectly reflect Italy's howl of despair, but they offer nothing in the way of solutions. And nor, on the face of it, does anyone else.
Günther Oettinger: 'The markets will teach Italy the right way to vote' Even if the Five Star/League alliance doesn’t increase its vote in the next election, the centrists are so hopelessly divided that it is impossible to think of them as able to form an alternative coalition government.
There may still be time for the eurozone high command in Brussels and Berlin to prevent the impending road crash. But they can only do so by cutting Cottarelli some slack, and loosening the fiscal straitjacket accordingly. Precedent would suggest that this is indeed what the eurozone will do. At every stage during the euro’s ongoing crisis, Berlin has drawn its lines in the sand, only to see each one breached in an attempt to save the single currency from collapse.
Similar band aids will surely be applied this time, allowing Italy’s centrists to regroup and and pull Italy back from the brink. The alternatives look bleak.
Once markets cease to believe in the possibility of political solutions, things will quickly degenerate. Spreads will widen dramatically back to where they were at the peak of the eurozone crisis, making it hard to impossible for the government to fund itself in debt markets.
Who in their right mind would buy Italian Treasuries given current uncertainties? One answer to that question might be the European Central Bank, through existing central bank asset purchase facilities or by activating so-called “Outright Monetary Transactions”. This might help a bit, but the OMT option is only open to programme countries that have agreed challenging fiscal targets and reform agendas. This is precisely what Italy is rebelling against. In any case, it seems likely that matters would come to a head well before we reached that point. The ECB would also face strong resistance to increasing its exposure to a country whose forthcoming election is likely to be a proxy on whether or not to stay in the euro.
In such circumstances the so-called “doom loop”, whereby impairment of sovereign debt infects the solvency of the banking system through its holdings of Italian Treasuries, would soon return. Already there is evidence of capital flight, forcing Italian banks to draw ever more heavily on central bank liquidity. This in turn increases the size of the potential liability in surplus nations such as German and the Netherlands. Alarm bells are ringing loud in Frankfurt, where the Bundesbank Target 2 balance will shortly breach the €1 trillion (£870bn) mark. In the event of a collapse in the single currency, this money would be lost to Germany, the greatest wipeout of middle class savings since the Second World War.
The Eagle’s “Hotel California” — you can check out any time but you can never leave — has been used as an analogy in Britain’s apparently intractable Brexit negotiations. If true of the EU, it is doubly so of the euro. There is no pain free way of leaving the euro.
If the intention is announced, the markets will massacre Italian assets and bankrupt the country overnight. If preparations are made in secret, it amounts to the same thing; as soon as the markets suspect, the country will become subject to a catastrophic run.
The Varoufakis idea of a parallel currency — or mini-BOT — is similarly flawed. No-one outside Italy will bank it except at massive discounts, and if seen as a staging post to eventually leaving the euro, there would again be a stampede for the exit, forcing the pace of events.
Liberal elites have brought this calamity on themselves. By refusing to listen, and reform accordingly, they have doubled down on their mistakes. As Italy’s populists charge headlong towards the cliff, they drag the whole edifice with them into a world of mass default. Who knows what comes next, but the way things are going, Italy could be out of the EU before Britain."
0
Trouble brewing in Italy? on 16:30 - May 30 with 2067 views
Trouble brewing in Italy? on 09:59 - May 31 by Highjack
Unelected European Commissioner: “The markets will teach Italy the correct way to vote”.
This absolutely sums everything up for me.
Get us out now.
Careful now you will have the remoaner losers along soon telling you that democracy should only exist if the result goes their way and it should be a best of 3 otherwise.
302 AFLI
SIUYRL
[Post edited 31 May 2018 10:14]
OUT AFLI SUCK IT UP REMOANER LOSERS
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