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World News See other World News Articles Title: "A Toxic Coup Narrative": Why Italy's Political Crisis May Be About To Explode On Friday Europe experienced an existentially terrifying "deja vu" moment straight from the 9th circle of Europe's 2011/2012 sovereign debt hell, when first Italian, and then Spanish, yields exploded amid fears of political chaos in the Eurozone's 3rd largest economy, coupled with the threat of an imminent collapse of the Rajoy government in Spain, the 5th largest economy. But while Spain is a late entrant to Europe's "political chaos" soap opera - although with both El País & El Mundo calling for an early general election, it is only a matter of time before this particular box of gunpowder also explodes, all eyes remain on Italy where not only have short-term rates blown out to levels that would send MF Global into Chapter 22... but the BTP-Bund spread exploded well beyond Goldman's "contagion" threshold of 200bps... ... while the scariest chart of all revealed that Italian redenomination risk is now at an all time high, reflecting the reality of Italy's 'Mini-BoT' parallel currency concerns. However, if it was the market's intention into scaring Italy's political system into submission, the same way it did in 2011 when the ECB got Sylvio Berlusconi to "quit" in just a few days as Italian bond yields exploded, it has failed, and according to the latest development in Europe, the Italian crisis may be about to get much worse. For those who missed it, Italy entered the weekend with the country deadlocked in what may be a Euro-defining clash whether euroskeptic professor, Paolo Savona, strongly endorsed by the League party, is allowed to become the country's next economy minister. Here are the latest troubling details from Leonardo Carella: The nomination of the designated Finance Minister, Paolo Savona, is being held back by the President of the Republic - a prerogative he formally has but that has rarely been exercised - reportedly over Savona’s anti-EU views. From President Mattarella’s point of view, Savona, an 82 year-old professor who served in Ciampi and Berlusconi’s administrations, would send the markets out of control and would bring Italy to the brink of open conflict with the EU. From Lega’s point of view, the nomination of Savona was one of their major wins in the coalition formation game, and the only guarantee of a strong anti-EU slant to government policy, after the coalition contract’s sections on Europe were heavily watered down. Salvini just tweeted that he is “really angry”. M5S is, for now, supportive of their coalition partner. This is how a constitutional crisis begins. The possible scenarios now are: Most likely, President Mattarella gives in under public pressure and threat of a new election. If Mattarella’s worries are correct, we’re in for a rough ride, but the crisis is averted. If Mattarella and the coalition partners hold firm, we may be set for new elections, with M5S likely to repeat April’s success and Lega likely to increase its share of the votes, eating up Berlusconi’s party. A very unlikely scenario is that Parliament calls for Mattarella’s impeachment, as per Article 72 of the constitution. However this isn’t likely to bring him down as the Constitutional Court has the final word. Alternatively, the coalition partners may find an alternative option as Finance Minister. But Lega really stuck its neck out, so it’s unlikely. Finally, it’s also possible that Lega holds firm and M5S doesn’t want new elections, so that we’re back to the drawing board, with M5S trying to piece together a new majority Overall, while Mattarella’s position is constitutionally sound, it’s politically untenable. There are very high expectations on the new govt and a member of the old guard taking (almost) unprecedented action to block them is going to play in the hands of M5S and Lega. But the most worrying points are: toxic “coup” narrative developing; in the next days, if the crisis worsens, calls for a show of force, for now limited to a few ultras, will grow louder. Plus, Savona’s appointment means Lega is dead serious to face off the EU. Savona said in an interview that the EU economic model is a continuation of the 1936 Nazi “Funk plan”, whereby Germany would submit the economies of the rest of Europe to its whims, with the only difference that the EU does that via democratic means. Meanwhile, the oppositions are AWOL. In conclusion, this developing crisis could be over by next week, if - as I think will happen - Mattarella folds. But then Italy will have a sharply Eurocritical Finance Minister, with all that it entails in the short (market reaction) and long term (open conflict with the EU). In other words, Italy now finds itself trapped, with the "best", and most likely possible outcome being what the sellside predicted was the worst case scenario as recently as March. As for the worst one, well... buy bitcoin and gold. Poster Comment: Re-denomination means Italian euros become lira, Spanish euros become pesos and Greek euros become drachma. That is why Italian tourist towns hold onto German euros and never redeem them at the Bank. All euro notes have a 2 letter code saying which country printed it. When the EU crashes, euros go back to their originating currency. German euros will be more valuable as Deutschmarks. Post Comment Private Reply Ignore Thread Top • Page Up • Full Thread • Page Down • Bottom/Latest
#1. To: Horse (#0)
We must wonder how this will all play out since the collapse of the EU will certainly put the whammy on what is going on in Brussels. And then there is the eastern expansion of NATO which worries the Russians. I met a Ukranian girl online and she was living in the area that Russian militias were active. Haven't heard from her in a while. ;) "When bad men combine, the good must associate; else they will fall, one by one." Edmund Burke
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