Italy Trembling on the Brink

Wolf Richter's picture

Wolf Richter

“I believe, no,” is how Italian Prime Minister Mario Monti answered the question if Italy would seek a bailout—lacking the bravado and vehemence with which Spanish Prime Minister Mariano Rajoy had claimed for the longest time that Spain wouldn’t need one. Until it needed one. The question was hot. It followed the kerfuffle that ensued when Austrian Finance Minister Maria Fekter had let it slip Monday that Italy, given the high rates it has to pay on its debt, might also need “support.”

Monti was addressing restive German taxpayers on Bavarian public radio: He understood that Germans were looking at Italy as “a merry and undisciplined country,” but Italy was much more disciplined than other countries, he said, and wasn’t all that merry.

Italy is paying twice, he said: for the bailouts of other countries and very high rates for its own sovereign debt. Germany pays only once, namely for the bailouts, because it pays practically no interest on its debt. But he promised his German listeners: “The budget deficit this year will be low, only 2%.” And next year, a surplus is scheduled. “The country is changing,” he said.

A full-fledged bailout of Italy is a theoretical construct, anyway. As the third largest economy in the Eurozone, it’s too big to get bailed out by the Eurozone. Of the 17 member states, five, if Cyprus is included, are already being bailed out. Leaves 12, including teetering Italy, to pay for them. If Italy falls, the two major countries left standing to bail all of them out would be Germany and France. An impossibility.

And Italy is desperate. “Schnell, Frau Merkel,” screamed the front-page headline of the Italian business daily Il Sole 24 Ore.



“Hurry up, Ms. Merkel,” an open letter to German Chancellor Angela Merkel, was a plea to do what it would take to save Italy—and thus the Eurozone. “Great Germany is losing its sense of history ... and solidarity with European partners,” the article admonished, despite the hundreds of billions of euros that German taxpayers already committed to the bailouts. It called for immediate action, which would be in Germany’s own interest, and had “at least three” demands:

1. European-wide deposit insurance. Problem: it doesn’t exist yet, and no bank has paid into the fund; thus, it would be taxpayers, particularly Merkel’s voters, who’d have to transfer their wealth to bail out banks and depositors in other countries.

2. Give banks direct access to the bailout fund EFSF. Problem: it was sold to voters as a bailout mechanism for countries, not corporations.

3. Unification of bond yields via Eurobonds. Cost of borrowing would be the same for all countries, raising it for Germany and France, and lowering it for Spain and Italy. A bit “more complicated” to implement, it would require constitutional reforms of all countries as they would give up part of their national sovereignty. A “European constitution” would have to seal it. “Leaders in every country, including France and Germany, must have the strength to convince their electorates of the short- and medium-term benefits.”

And it threatened Germany with economic demise, having learned how to do that from Greece: “Germany cannot maintain its health and strength amid the debris of small and large European countries.” Wondrous benefits, on the other hand, would emerge from a political and fiscal union—run by bureaucrats in Brussels, I presume: Europe would suddenly become “a fierce competitor” that would be able to “ensure income and jobs for a new generation.” If not, “you”—that’s Ms. Merkel—“would be overwhelmed by a spiral of defensive interventions that jump from one country to the next.” And it concluded, “It’s clear to everyone that the United States of Europe is a reality.... Faccia presto, signora Merkel.”

It would be a debt and transfer union. Debt would be transferred into one direction and wealth into the other—unless strict controls were instituted. If countries were to guarantee the debt of other countries, guarantors would have to be able to control how much can be borrowed; or else, Greece for example, could borrow cheaply and without limit while someone else would ultimately have to pay off its debt. So, any kind of common debt, be it Eurobonds or other instruments, would require a supra-national entity that decides to what extent a country is allowed to borrow.

Once the budget is in deficit, elected national representatives would lose their ability to fund infrastructure projects, boondoggles, subsidies, corporate handouts, wars ... a fundamental democratic activity, messy as it can be. Instead, they’d have to go begging to the board of bureaucrats who speak different languages and hail from different countries. That board would wield enormous power over each country as it decides what gets funded and what doesn’t, based on whim or political persuasion. National politicians do that too, but they’re part of the country and have to run for reelection.

The US had hundreds of years and a civil war to figure out how to manage its common good. The Eurozone is a group of 17 independent nations with ancient cultures. Uniting them into a federal arrangement will take decades, if it’s even possible. But the debt crisis is here now. Italy is running out of options. Spain is hopelessly in trouble. Greece has hit the wall. And turning that fiasco overnight into a healthy United States of Europe is an illusion.

In Greece’s chaotic wake bobs the Republic of Cyprus, the fifth Eurozone country to get a bailout. A massive banking scandal, tight connections to Greece, corruption, too much debt, and a lousy economy took it down. But tiny Cyprus has one thing—and it’s huge—that other debt sinner countries don’t have. Read.... Manna for Bankrupt Cyprus.

And here is the hilarious but brutally truthful video from down-under comedians Clarke & Dawe that in 2.5 minutes summarizes with superb accuracy the entire Eurozone debt crisis.

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ptolemy_newit's picture

A stable euro at 1.56, small er group and a chaotic union

Give Turkey space!

sounds like strong foriegn policy?



falak pema's picture

For PAx Americana construct and Potus on relection trail Spain and Italy cannot fail; as THEY, the Oligarchs, would lose more than the poor italian shills. They would lose all, the confidence in the greenback,  as the WS ponzi would hit the dirt sack as would the City. When you lose the faith and trust in capital construct, vision of tomorrow,  then all is lost. As the universal church of asset levitation has no God anymore. Then we are in the dark ages or in the throes of renaissance, but it will, either way, be a whole new ball game. 

azzhatter's picture

tieing stones together and expecting them to float

Brit_Abroad's picture

US trrops are still based in Germany because

1. Germany is still officially an occupied country

2. No post WW2 peace treaty was ever signed

A sovereign German nation simply doesn't exist

Oh yeah, it certainly makes a good staging point but then so does Airstrip 0ne

Setarcos's picture

Same with Korea, Vietnam and, I suppose, all the other 150+(?) countries the Washington Imperium has occupied since WW2 (but really FAR longer, considering the Indian Wars, the Spanish/Mexican Wars and so on.

I say "Washington Imperium" because, just like the Roman Empire, all power resides in one 'special city' which rules over the mainland Empire from Florida to Washington State - and purchased Alaska - as well as the Hawiian and other overseas territories directly.

It's the same as that there never was a "British Empire", really a London Empire based in the City of London ... nor a "French Empire", it was a Paris Empire.

At least the Romans were kinda honest, in that "all roads led to Rome".  Now everything is obfuscated, to the point that most Usans still do not believe that they live in an empire, though things have changed a bit during the last ten years.

Never before in history have so many millions of people believed that they comprized "one nation under god".

Never before in history has there been a city of politicians, etc. actually being able to dominate the entire planet.

Rome never came close - the 'world' was then within walking distance.

Even London never came close, despite technologies the Romans did not have.

Washington has everything possible with which to conquer this entire planet, hence the PNAC and, thus, the systematic destruction of Iraq, Jugoslavia, Libya, now Syria and on to Iran, then Russia and China.

One dual snag.  Empires have always failed and pending WW3 will be nuclear (already is, if you count DU weapons of mass destruction).

This failure of empire is likely to kill every living thing on this planet.

mjk0259's picture

Seems like the US and Europe both ended up with the same stategy for the common good - let banksters run your economy and keep giving them money.

falak pema's picture

Monti-Python plays at black knight? The markets have already said : yield and give passage; we await his reply before the fun starts. 

Monty Python And The Holy Grail- The Black Knight - YouTube

Setarcos's picture

Thanks  for reminding me.

As I note, further down, I'm about to watch my "Holy Grail" DVD ... heck I'm even independent of YouTube for this.

Thinks!!!???  Wonder if my DVD is better than gold?

Nobody For President's picture

The Clark/Dawes video finally explained it all - should run that on prime time CBS...

Setarcos's picture

Clarke & Dawe are very good.  I needed a good laugh.

I'd almost forgotten them, though I live Australia, because I haven't watched any TV for about three years ... their slot is on the A(ustralian)BC, which on about par with the BBC; better than commercial crap like Chns 7, 9 & 10 and Fox of course, but not much different when it comes to so-called 'news' and analysis ... for which I surf the internet globally.

That's why I'm here in ZH; why I'm subscribed to RT - notably Capital Account with delectable Lauren - PressTV and why I use Jeff Rense as a news aggregator, along with Alex Jones.  And many more sites offering different perspectives.

But I tend to get overly(?) serious in a world I see going to hell, so it's good to have a laugh and I'm about to indulge in my "Extraordinarily Deluxe Edition" of Monty Pythons "Holy Grail" DVD.  See ya after the crash.

q99x2's picture

Alex Jones has then next phase of what happens after the collapse according to the NWO plans. I think it involves an attack on nations by military that are under the control of the banksters.

pain_and_soros's picture

As difficult as it would be to just imagine the thought of someone asking (or demanding) corrupt, "merry" (and bankrupt) Italy to bail out a country if not a continent, I wonder what the response would be???

That's right - farcical Italia.


azzhatter's picture

2% deficit is a bald face lie. Accounting fraud is all it is and Monti is a slimy little prick

knukles's picture

By that same accounting, Uganda has a Surplus
Italy is no Uganda

Cole Younger's picture

The Genius of Mutual Indebtedness - Nigel Farage

falak pema's picture

coming from a Brit, that is ironic fit, 'cos his country is in deep shit, but thats the normal City banksta fiat tit, and he is, when the penny drops, a total reactionary twit; i've said my bit. 

world_debt_slave's picture

I'd say teetering, but just semantics, a tornadoe ripped through Venice, portending of things to come?

Mad Mad Woman's picture

France is in the same boat as Italy. Maybe not as bad financially, but close. Let the bankers go belly up.

RoadKill's picture

Anybody else notice German yeilds creeping up while UST is falling. Gap has closed from like 35+ bps to 12. Germany slowly loosing its AAA status. That should get German tax payers thinking anout the cost of European Union.

Debt-Penitent's picture

The "kerfuffle"?
Holy shit, never seen that phrase used in International Finance definition before.
Yup, the Hedge never ceases to impress.

steve from virginia's picture


Europe doesn't need a federation to fix itself it needs a fiscal agency with self-funding mechanism and a computer to offer fiscal debt instruments.

Europe could then compete with the US to sell 'safety first' Euro-treasury bonds. Right now they can't and this lack is killing them.

It's a dog-eat-cat world: European nations are denied loans which bankrupts them. Their fuel consumption is then exported presumably to the US (whose financiers deny the needed loans). See those 'low' US gas prices ... See Euro-treasury bonds above.

The EU fiscal agency would institute a continent-wide oil import fee. Think $50 per gallon of gasoline/diesel fuel, that should do the trick:

 - There would be immediate, shocking energy conservation. EU fuel imports would drop by 2/3ds or more.

 - If the imports don't drop raise the fee. Maybe $100/gallon!

 - EU auto/airline/fuel waste industries would collapse.

 - Drain of euros overseas (used to pay for fuel waste) would end.

 - EU would have funds to subsidize debt retirement  that would equal the funds that currently subsidize (bankrupting) waste.

 - Unemployed would be directed toward agriculture and small workshops, transit and restructuring cities and towns (away from auto use).

 - Big conglomerates and banking cartels broken up and malefactors prosecuted.

Not necessarily in order but if done the euro-crisis would be brought to an end. $50 per gallon not a pfennig less.

EFNuttin's picture

What Is Being Rescued? (regarding the Euro and the EU)

Pater Tenebrarum comments on the situation in Velvet Glove, Iron Fist

The idea of imposing capital controls and limiting the free movement of people across borders are likewise threats that must make every thinking person wonder what the hell the whole 'rescue operation' is supposed to be 'rescuing'. After all, these are basic tenets of the EU treaties the possible suspension of which the eurocrats are discussing here. This is what the EU was established for in the first place: to enable the free movement of people, goods and capital. If these are suspended, then what is it that is being rescued?

It seems rather obvious to us that when citizens can no longer get their property from the banks and can no longer move their bodies and capital freely within the EU, then what is 'protected' are not they, but the solely the bankers and the political and bureaucratic elite.

Bring back Le Guillotine.

Seer's picture

"it needs a fiscal agency with self-funding mechanism and a computer to offer fiscal debt instruments."

Knee slapper there!

CustomersMan's picture


Should read:


"Europe doesn't need a federation to fix itself it needs a fecal agency..."

RoadKill's picture

Yes higher energy taxes over the last 30 years have really helped the EU so far

jeff montanye's picture

they have made their air less polluted than it would have been otherwise.  i am told their diesel doesn't stink like that in the u.s.  

but the whole laughable thing is:  have the bank bondholders been asked to sacrifice anything for the insolvent messes they invested in?  have the managements been sacked and their bonuses clawed back for the decade, at least, of abysmal fiduciary stewardship?  no?  but the taxpayers (including those of other countries) should pay for these mistakes?  ditto for the u.s. and japan?  

iceland got it right.

Imminent Crucible's picture

"their diesel doesn't stink like that in the u.s.  "

Time to wake up, Mr. van Winkle. U.S. road diesel was moved to the ULS (Ultra Low Sulfur) standard years ago. Didn't you notice that diesel went to $4 to pay for the extra refining?

Europe stipulates 10 parts sulfur per million, Canada and the US require no more than 15 ppm. The previous standard, VLS, allowed no more than 500 ppm.

XitSam's picture

I'll take just one part. "European nations are denied loans which bankrupts them."

If someone is hovering near bankruptcy (one who cannot repay the debts they owe to creditors), giving them a loan, ie. more debt, does not solve their problem, it makes it worse.

knukles's picture

Fraudulent Conveyance

azzhatter's picture

just a little to get thru that rough patch

ronaldawg's picture

Gotta love the phrase "European Partners".   With friends like that, you don't need enemies.

Also when is the U.S. going to pull its troops out of Europe (Germany) and let Germany pay for it's own self defense (rhetorical question)....

Zero Govt's picture

the US troops are stationed in Germany for the essential role of fighting the Cold War against those nasty Ruskies

meanwhile the Cold War ended over 20 years ago when the Berlin Wall came down, those Commie East Germans walked across the wall and Russia became Germany and Western Europes biggest gas supplier many years ago

we're still awaiting American Intelligence (!) to catch up with Intel reports the war is over... then 3 more years for a decision by the US Joint Chiefs of Staff to be made ...then 3 more years to break it (gently) to the President they should pull the troops out of Germany

this lightening speed high-tek US intel system is managed by the CIA (Cannot Intel Anywhere) ....expect the troops to come home in 2035 ...'ish

Your Tax Dollars Workin' Hard ..Defending America, ok Stuttgart!

dolly madison's picture

The bases are still in Europe to keep Europe from competing with us for empire.

JOYFUL's picture

Zero, a good shot at the dart board, but no bullseye..

among those Commie East Germans [who] walked across the wall was  Stasi agent and student organizer(enforcer)Frau Merkel herself, along with the detrius of the formerly "Communist" GDR, all now snug as bugs in a rug in the heart of supposedly "Kapitalist" federal Germany...

once a con, always a con \ game.

There really never was a "cold war" to send US troops to defend against...only an arranged transfer of assets on behalf of the Gehlen Organization, which won the big stake poker game at the table where Churchill, Stalin, and Unca Puppet supposedly sat together...Merika got a flood of [sio]Nazi infiltrators to staff it's security and weapons infrastructures[Operation Sunrise], and Europe got US Troops n $ to pay for and enforce the creation of a sionist-controlled super state now being given the finishing touches...while back home in Merika, the dupes get to watch the final stage of the controlled demolition of their country.

The socalled CIA was never more than a subsidiary of the Nazi\Mossad Kriminal Kartel, Dulles Brothers,'s job being exactly the opposite of finding out information vital to the security of the James Jesus Angleton finally confessed, in his last interview - he was employed to conceal information damaging to the interests of those puppetmasters which controlled\control both "West&East" factions of the Kosher Kleptocratic Konspiracy...

History (K -TM) ain't what they teach us to believe.

CompassionateFascist's picture

US troops stay in Germany because a) they sluice money into the German economy, and b) it's a convenient staging point for troops going to fight the various Isramerican wars in Wogland.

MSimon's picture

Got to hand it to those Jews. Smarter than all the rest of the world combined to pull off what they have done. And they are the 4th largest military eqpt supplier in the world (at about $5 bn a year). War is good business. And you know how good those Jews are at business.

BTW did you hear about the secret back door the Jews have been putting in all Intel chips for the last decade or so (Intel Chips are designed in Israel)? Not only do they control everything. They have all your data too. Clever boys.


Brit_Abroad's picture

US troops are still in Germany because Germany is still secretly an occupied country. There was never a peace treaty following WW2 and as such a sovereign German nation no longer exists. And yes it does make a good alternative to Airstrip One.