Sunday, March 3, 2013

The Italy-Germany Problem

This past week....after elections in Italy....there's an uneasy feeling in Germany.

What the elections said....was that Italians are not that happy over austerity measures, and willing to vote for some radical political groups.

Among these groups....there's the Five Star Movement.  One of the themes that this group is to dump the Euro, and retreat back to the Lira.  Then they'd rewrite the their own agreeable situation, and reinvent the entire Italian economy.

German economic experts are mostly sitting there in disbelief.  I imagine their common response would be: you'd have to be an idiot to think this would all work out OK, and put Italy back into a great condition.

As an American watching this infighting over economic reach a point of asking the stupid question....what if?  If Italy dumps the Euro, then what?  A number of folks in Greece and Cyprus would immediately demand the same game-plan   That's probably going to be the next step in Spain as well.

I believe the German economic experts are starting to imagine a scenario where over a hundred-day period....the unthinkable starts to occur.

The value of the Euro then?  It would have to rise up against the dollar, and a number of big-spenders would be dumping the Euro in a hurry....hoping to find stability either in the dollar, or in gold (my pick would be gold).  You could easily see the Euro being questioned....even in Germany at this point.  And the US strategy of playing always weak and using the weak dollar to their advantage?  Down the toilet and flushed away.

It's a pretty harsh scenario, and I'm guessing dozens of German economic experts are now sitting around a table and discussing how this would work, and how Germany ought to react.  It's inviting a big huge an election year.....and even Chancellor Merkel has to shake her head over implications.  Never in her life....did she have to debate the wisdom of the Euro over the old Deutsche Mark.

And the sad thing?  At the head of this Italian a former Italian comedian-turned-political activist (an Italian Tea Party kind of guy, by my own terms). Beppe Grillo will readily best....he only has a dozen odd platform themes.  He has no interest in grouping his folks with a national political team.  He sees everything about the Five Star simply pushing a couple of common themes that the public generally appreciates (term limits, no political office for anyone convicted of a crime, and dissolving county government levels where so much corruption resides).

For a serious German political expert....having an Italian comedian in the midst of serious a joke.  You can just imagine where this is going toward, and how the public will react.

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