Sunday, October 9, 2016

Keep an Eye on Italy

For the remainder of this year and into the start of next, keep your eye on Italy as a potential origin for "financial contagion", more likely to be the catalyst for the final breakup of the European Union.

A little background is in order.  Italy has been a focus of efforts to stabilize the EU since the last fiscal crisis.  You remember the term PIIGS, right?  That was the term for Portugal, Italy, Ireland, Greece, Spain, the most financially troubled countries in the EU.  My earliest reference to the term was the first actual post on this blog, so it goes back before February of 2010.

Like most of the Western world, Italy is going through a period of anger with their elected leaders, thinking them a corrupt, venal, criminal ruling class interested only in their own betterment at the expense of taxpayers.  In 2007, Beppe Grillo, an Italian actor and comedian, launched Vaffanculo Day to register that disgust with politics.  Those of us not from areas where Italian is spoken every day are probably not aware that “vaffanculo” is Italian for “f*** you” (you'll also see that interpreted as “f*** off”).

What began as a joke morphed into a political party which took the more publicly acceptable name of the 5 Star Movement or M5S.  M5S then morphed into one of the most popular parties in Italy, winning mayoral elections in Rome and Turin earlier this year.  Italy has had virtually no productive growth since it joined the euro in 1999.  M5S blames Italy’s chronic lack of growth on the euro and it appears a large plurality of Italians agree.
M5S has promised to hold a vote to leave the euro and return to Italy’s old currency, the lira, as soon as they’re in power. Under these circumstances it would probably pass.

Meanwhile, the current pro-EU Italian government of Matteo Renzi is holding a referendum on changing the Italian constitution later this year.
Remember Brexit?  How about calling this iExit?  Leaving the EU and government reform have become the central theme of a referendum coming on December 4th, which CITI bank is calling a bigger risk to the EU than Brexit.  Renzi has offered to take power from the senate because Italians think the senate is a useless, obstructionist debating club.  (Sound familiar?)  Renzi's proposal doesn't seem to be widely popular because Italians also don't seem to trust transferring the power to the Prime Minister.  They have a well-kept memory of a too-powerful executive (can you say Benito Mussolini?). 

If Renzi's constitutional change fails, he has said he'll resign, and this opens the path to Italy leaving the EU. Voting against the current government, though, seems like it's giving them the finger, a real Vaffanculo Day. 

There's more at stake here than just populist politicians and an angry population wanting to tell their leaders to “f*** off ”.  Italy's economy has brought the concept of bank bail-ins back to the population.
Last year, four small Italian banks became insolvent and immediately needed capital. They turned to a bail-in.  
A pair of retirees living off their savings in those banks responded by committing suicide.  The news rocked the nation.  The level of anger at the banks and the government is reaching a boiling point.  (Again, sound familiar?)  It’s hard to imagine that the frustrated Italian populace won’t vote to give the establishment the finger in the referendum and humiliate the pro-EU government.  By that time, our election should be over (barring another Florida-style perpetual recount).  It seems like it has the potential to be a pretty ... interesting couple of months.
Beppe Grillo; originator of V-Day and the M5S party.  Getty Images.


4 comments:

  1. I visit Italy every few months and those I meet and know remain rather cheerful,mind you what else can they do?

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  2. Va fanculo means F you in the ass (culo means ass, in Spanish, too IIRC). The Italian principal we had in high school (mid Sixties) was a great guy, but he replaced this common saying among Italians with "Pasta fazool" instead. He didn't want to corrupt our young, relatively clean, minds. My English teacher - a real maverick in those days - didn't mind relating the actual curse and what it meant.

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  3. Italy has been the dumping grounds for illegal immigration for decades, perhaps 60 years and maybe 100 years. Most people in Italy today are not Italian. These people live "off" the country, they suck it dry. I do not mean that they are all "bad" people but simply that as illegal immigrants they do what they must to survive and that includes taking jobs the citizens should get, taking various forms of welfare which drains the economy and stealing and committing more serious crimes.

    It is ironic that many of these immigrants came from Bosnia, Kosovo, Macedonia, Montenegro, Albania, Chekoslovakia, etc. And these older established groups of illegal immigrants are very unhappy with the new immigrants from Africa and Islamic countries who are much more violent and prefer welfare and theft to working. Ironic for the previous runs of illegals to be so upset with the latest runs of illegals. Italy is collapsing before our eyes. If you walked around and large city in Italy today NOT on a guided tour 90% of the people/residents you would see are illegally there from their home country and of these 50% re watching you to see what they can steal.

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  4. Thanks for those reports from "on the ground", Thud and Anon 10-13@2020.

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