After Eurosceptic parties Lega and Five Star Movement thwarted the atempt of pro – EU president Matarella to overturn the democratic vote and prevent the Eurosceptic coalition from forming a government, the EU, showing its usual comtempt for democracy and the welfare of the people has decided to punish the nation and its people, in similar ways to those used to punish Greece, Portugal and Ireland when the diktat of Brussels was defied. The result is Italy no longer has a lender of last resort ready to buy up its sovereign debt, and therefore has no last line of defence for its always dodgy commercial banking system.
As long as Italians remain defiant and refuse to accept a government of EU approved bureaucratic appointees, The European Central Bank will progressively removing its shield as quantitative easing is wound down and purchases of Italian bonds fall to zero. There will be no protection by the end of the year. The Draghi pledge to do “whatever it takes” to prop up Italy’s membership of the single currency system no longer holds.
No ECB rescue will be possible unless the Italian parliament formally authorises the government to invoke the EU /IMF bail-out mechanisms (OMT-ESM) and accepts austerity imposed by Brussels. This would amount to a “Troika” regime similar to the one that wreaked havoc on society in Greece in order to protect the interests of European .
The bail out funds would then have to be approved by a vote in the German Bundestag and the Dutch Tweede Kamer. The terms they would impose on Italy would effectively put that nation under German occupation. An Italian government would not be able to act without permission from Berlin. It is inconceivable that either Lega nationalists and Five Star Eurosceptics would accept such an arrangement. Some of them would see it as a tactical opportunity to free their country from the “German cage” of monetary union.
President Sergio Mattarella may be a man of Virtù but he is also an unelected placeman of the old “casta”. Should he try to deliver Italy to EU budget commissars through a technical government, in defiance of his own parliament, he risks a dangerous breakdown of civil order.
What the EU are overlooking is that Italy, with a population of almost sisty million and the eighth largest economy in the world, might not accept being bullied as Ireland, Portugal and Greece with their small populations and weak economies had to. They are making the same mistake with Britain, and despite the best efforts of Theresa (the appeaser) May to yield to all their demands are making a civilised process leading to Btitain’s exit from the Union impossible.
Europe has gone back to the ridiculous circumstances of the 2011 crisis when Brussels prioritised saving the failinjg single currency over the economic interests of membr states and a Eurozone member state could lose access to the capital markets and slide into bankruptcy, like any private company, or the City of Detroit, or Orange County (1994).
Italy however, despite its perpetual political and financial chaos chaos, is not a poor nation. The country does not have a debt problem as such. While public liabilities (sovereign debt etc.) are high at 132pc of GDP, private liabilities are low. The Bank of International Settlements estimates that total (core) debt is 263pc of GDP, compared to 290pc in the Netherlands, 303pc in France, 321pc in Portugal, and 338pc in Belgium.
Italians have greater financial wealth per capita than the Germans. They have €1 trillion in bank accounts and $3 trillion in liquid assets. The country has a current account surplus of 2.6pc of GDP. It has a primary budget surplus of 1.7pc of GDP, and a better fiscal record lately than France or Spain.
It is rich but it has become trapped in a “bad equilibrium” with an overvalued intra-EMU exchange rate, as a direct result of being forced to accept the Euro single currency twenty years ago, when although it did not meet the qualifying standards set by the EU itself, it was admitted thanks to creative accounting because the project was never about economic stability, but was seen a major step towards political union and a European Superstate.