Berlusconi, Italeave, & How To Checkmate Germany

Authored by Tom Luongo,

As the Italian election season heats up it’s clear that Silvio Berlusconi is right where he wants to be.

In the spotlight.

And because of that, his coalition with the Lega Norda (Northern League), while leading in the polls overall isn’t unified on much more than containing the electoral success of Movimiento 5 Stelle (5 Star Movement, or M5S).

As I talked about over the weekend Lega Norda’s candidate, Matteo Salvini, is moving farther along the populist route, declaring himself a Trump-like change agent while excoriating the EU for its immigration policy.

On the other hand, Berlusconi is tempering his tone with each passing dayFirst it was not leaving the euro, so-called Italeave, and more recently EU rules on budget deficits.

 

https://www.zerohedge.com/sites/default/files/inline-images/20180122_ita.jpg

Ultimately, that’s Berlusconi’s job, to sell the EU to an Italian electorate reaching their breaking point.

M5S, the most radical of parties is leading the polls with anywhere from 26 to 30% overall.  No other party including the Democrats of sitting Prime Minister Paolo Gentolini comes close.  In fact, the Democrats are looking at support dropping below 20%.

Leaving the euro is supposedly only backed by 30% of the people.  Brexit was supposed to fail by 10-12 points and Hillary had a 98.5% chance of winning on election day.

So, while Italy’s new rules for the make-up for parliament almost guarantee a minority government, there is still a possibility of a grand coalition, similar to what Martin Schultz and Angela Merkel are trying to swindle voters into accepting in Germany.

But, the problem for Berlusconi and the Democrats, if that is their plan, is that it’s becoming obvious he is their stalking horse in this election.

He and Salvini do not see eye to eye on the subject of the euro, taxes, immigration or much else.

Euro-nly a Pawn

Salvini is out there stumping that the euro is a ‘crime against mankind.’

 

https://www.zerohedge.com/sites/default/files/inline-images/20180121_ital_0.jpg

Mr Salvini said: “I believe that one single currency for 18 economies, each different in its own way, just won’t work in the long term." But statistics here is more important than anything else.

“Since the introduction of the current currency, Italy’s debt has risen by €900bn. This experiment has failed and we should not go any further down this road.

And he’s right.  But, the reality is that, as of right now, exiting the euro is not a winning political talking point.  Everyone is backing away from it while at the same time, everyone knows it’s in Italy’s best interest.

Including Germany.

Let’s say the current situation holds and Berlusconi and Salvini et.al. limp across the finish line with around 40% of the vote, while M5S takes 30% and the rest is divvied up between the Democrats and minor parties.

Then, with the changes to the representation rules in parliament Berlusconi could easily cut a deal with the Democrats for a Grand Coalition that sells out Italy to Brussels. But, Salvini will still wind up as Prime Minister.

Regardless of how far Lega Norda has come to become a national party, Salvini will still backed directly by a far smaller percentage of the population than M5S’s Luigi De Maio.

So, despite Berlusconi’s best maneuverings, politically, it still leaves Italy with a very weak government, which may be the point.

The difference here is that M5S will have a strong enough voice to support Salvini in any debt relief negotiations with Germany, which will have to come to pass this year.  AfD in Germany only got 13.5% of the vote. They are the official opposition.  But, M5S is the front-runner being obviously squeezed out by politicians loyal to Brussels first and Italy second (if that).

And the door opens up for him to go to the people and make the case for Italeave after dealing with Brussels.  All he has to do is invoke how Greece was treated in 2015.

Italeave Trumps Grexit

Because if Germany tries to play the hardball tactics it did with Tsipras, it likely won’t work in Italy.

Tsipras didn’t expect to win.  He wasn’t prepared for the game.  His finance minister, Yanis Varoufakis was. But Tsipras sold him out and enslaved two generations of Greeks to a debt yoke that is choking the life out of the country.

Salvini, if elected, will be facing the same thing. But will have support from Five Star Movement.  So, it will be very hard for him to betray Italy to Brussels the way Tsipras did Greece.  In fact, the path of least resistance for him is to call the EU’s bluff and allow the Italian Banks in trouble to fail.

This throws the decision back to Brussels to deal with the problem.

Because remember one thing, Salvini is right, Italy’s debt is 134% of GDP.  Most of the Italian banks are dealing with portfolios with NPLs (Non-performing loans) that top 40%.

Italy’s banking system is in terminal decline.

The European Central Bank has been propping up the price of Italian sovereign debt as the only effective buyer for nearly a year now.

italy debt

Something is going to have to happen.  And if Salvini and Berlusconi continue at loggerheads over basic issues like retirement, taxes and spending, then the market is not going to look upon that kindly and will continue selling Italian debt.

Let’s not forget that the ECB will be forced by The Fed to end its bond-buying program and allow rates to rise.  So, when, not if, Italy’s debt situation becomes untenable and another crisis breaks out Salvini would be in a very good negotiating position.

Why?  Because of the old adage then when you owe the bank a thousand dollars it’s your problem.

But when you owe the bank $2 trillion dollars it’s the bank’s problem.

And the bank in this case is the ECB along with most of the rest of Europe.  The only reason anyone still owns Italian debt is because the ECB has been a buyer.  But as the chart above shows, every0ne else has been selling to the ECB for the past two years.

Checkmating the Troika

So, unless there is the political will to consolidate all of Europe’s debt under one roof, this problem lands squarely at the feet of the ECB, the Bundesbank and the farce that is German politics.

This puts the decision on the Troika – The ECB, The IMF and the European Commission — to bail them out directly or kick Italy out of the euro.  And that’s smart politics.  Make Brussels the bad guy.  And Salvini is already playing that tune perfectly.

If they were all smart, they would have the Lira ready to deploy if things go south.

Since Wolfgang Schauble stepped down as Finance Minister in Germany, there is no one ready to take his place as Mrs. Merkel’s attack dog in these negotiations.   I suspect part of the reason talks between Merkel and the Free Democrats broke down was because the FDP head, Christian Lidner, was in favor of kicking countries like Italy out of the euro-zone.

Merkel talks a tough game on this, but ultimately is about EU integration over everything else.  Schauble was as well.  And Varoufakis knew he had them dead to rights in 2015 but Tsipras folded a winning hand.

Schauble was the one who threatened euro expulsion on the Greeks which both he and Tsipras knew was unpopular.  It’s why Tsipras folded.  He wasn’t prepared to pay the political price to do what was in Greece’s best interest.

Does Salvini? Does Berlusconi?

The market at this point is handicapping that they don’t.  The headlines are all ablaze with all the Italian parties having backed off on Italeave. But is it real or just a vote-buying tactic?

For M5S it’s the latter.  The question is still out on Salvini and the Lega Norda.

If Germany tries to strong-arm Italy the same way that they strong-armed the Greeks, I don’t see it going the same way.  Ultimately, despite Berlusconi’s wrangling, a plurality of Italians are backing fundamentally Euroskeptic parties.

If Salvini is the real deal, he would use his alliance with Berlusconi to raise Lega Norda’s profile to 20%, then build a coalition with M5S after the votes are tallied, freezing out any chance of hijacking the process.

In the end, it won’t be hard for whoever is in power to make the argument in the face of a major banking and sovereign debt crisis.  Framing Germany as the bad guy will be easy and at that point the EU dives head first into its first real challenge to its authority.

Comments

Klassenfeind MillionDollarButter Tue, 01/23/2018 - 03:53 Permalink

Germany checkmates itself with the import of 'rapefugees' and squandering it's wealth on Southern Europe.

We don't need some two-bit 'analyst' sitting in Gainesville Florida who can't even spell the name a major Italian political party, to write some long-winded bullshit article.

A certain 'Mr Panos' already brilliantly described a few years ago in a YouTube video how Germany will checkmate herself: "BANKRUPT THEM!"

https://www.youtube.com/watch?v=a1DWVchQOKw

In reply to by MillionDollarButter

Occident Mortal Klassenfeind Tue, 01/23/2018 - 04:03 Permalink

If the UK can navigate Brexit and get to 2020 without so much as a recession then the EU will struggle to hold it together.

 

Britain is possibly the only country that could have exited without suffering an economic contraction and the only reason is that British culture is so comfortable with very high levels of uncertainty.

 

The "keep calm and carry on" mindset is what makes Britain uniquely able to perform such a daredevil high wire act whilst the rest of Europe looks on agog.

In reply to by Klassenfeind

Klassenfeind Erek Tue, 01/23/2018 - 06:03 Permalink

Amen! Already roughly 200 days since the elections and still no government, and even if Mutti Merkel manages to form a coalition with the SPD it will be a shaky coalition at best.

The next government of Germany is bound to be full of half-baked compromises that won't solve anything, but instead will only aggravate all the current political, social and economic problems.

In reply to by Erek

Moe-Monay Klassenfeind Tue, 01/23/2018 - 07:13 Permalink

Print up Lira currency now and introduce it into circulation NOW NOW NOW.

Why wait?  It's better to ask forgiveness than it is to ask permission.

Sure there may be some sort of treaty obligation but fuck that!   Just print up enough bales of currency and release into system on the downlow.  Go with a cash only business system.  Currency should be government issued.  None of this fucking star of david private central banking scam stuff that debt based and yields tribute to the central banking cabal.  Imagine the fireworks.  Those dudes would have to find an excuse to invade Italy!

Boot up your parallel system before you need it Italy!

In reply to by Klassenfeind

Bobbyrib Occident Mortal Tue, 01/23/2018 - 04:56 Permalink

England has been a declining former empire for more than a year. Their economy is based on financial products and is a joke much like the US economy. The Bank of England also printed a fuck ton of pounds just like our Federal Reserve printed a fuck ton of dollars. Both of these countries are doomed in the long term. Do not try to fool yourself.

In reply to by Occident Mortal

chubbar MillionDollarButter Tue, 01/23/2018 - 07:51 Permalink

The leadership in Italy and the other countries wanting to leave, had better get their shit together and vote to leave soon. The EU leadership is pulling the same shit the DEMs are here in the US, opening the borders and bringing in millions of people they will convince to vote in lockstep with them, thereby overturning what is in the best interests of their people's culture and traditions, so that they can remain in power. The globalists need to be executed!

In reply to by MillionDollarButter

escapeefromOZ MillionDollarButter Tue, 01/23/2018 - 10:08 Permalink

Berlusconi is compromised and he lost all credibility when he started having sex with a minor sent to him by some secret service agency ( take you pick , Mossad , CIA all active here in Italy)  . Somebody knew the sexual preferences of Berlusconi and entrapped him .  But he survived the sex scandals. Apart  from the sexual scandals surrounding him like for example a group of  13 women  also called Olgettine always available on call , Berlusconi did no do much for the benefit of Italy . His time as President of the Council of Ministers (PM) was spent mostly to look after his Mediaset business and trips to visit his friend Putin. 

 When the Soviet European Union got fed up with him , having the sexual scandal abated,   they started playing with the  interest spread for Italian Treasury bonds and shorting the shares of Mediaset in the stock exchange .

In a short time Berlusconi resigned from his post and the incompetents in charge of the Soviet EU organized to impose Mario Monti as PM .  The result of this was the destruction of thousands of jobs in the real estate market and the imposition of " austerity " Measure on the economy . Fortunately Monti did not last long . 

http://www.telegraph.co.uk/news/worldnews/europe/italy/8887450/Mario-Mo…

In reply to by MillionDollarButter

Joe A Tue, 01/23/2018 - 03:44 Permalink

We all know what Berlusconi thinks of Merkel's ass.

Nevertheless Italy, your debts rising and solely blame that on the Euro denies your own responsibility of letting your debts out of control. Perhaps you couldn't devalue externally but you never wanted to devalue internally to compensate for that. That would of course also be very hard to sell to the public. But if you want to compete with more efficient and expedient Germans, you must be willing to make sacrifices.

escapeefromOZ Joe A Tue, 01/23/2018 - 10:25 Permalink

The debt is also due to a few huge scandals that hit the finance world  . 

The Forex scandal as and example . A scandal worth 350 Trillion dollars 

http://blog.wallstreetsurvivor.com/2017/02/21/7-biggest-financial-scand…

Add to the fact that members of the Government for political reason do not want to stop the maladministration ,  the waste and the money thrown out of the door to please lobby groups and friend of friends . 

In reply to by Joe A

Pi Bolar Tue, 01/23/2018 - 04:15 Permalink

Italeave the Eurozone just please do not bring back the Lira. Back in my student days it cost me hundreds of thousands of Lira to buy me a leather jacket in Florence in '88. Dirty, sweaty bank notes. Yuck! 

Lugfabio Tue, 01/23/2018 - 06:47 Permalink

Facts are someway much more complicated:

a) Lega (no more Lega Nord, neither "Lega Norda" that do not exist in Italian...) has a more complex route for making euro more light, and it passes through Claudio Borghi "Minibond". While Tsipras was completely unready Salvini (and its economists, Bagnai and Borghi, and several other no euro economists like Rinaldi, Minniti and Biagetti) are perfectly aware of the problem of dealing with ECB on debt. ECB could create a lot of troubles simply increasing the BTP - BUND spread.

b) The biggest trouble to Mr Salvini comes from the fact he is the only politicians brave enough to show off the destruction brought by Euro to the Italian economy. The others are or corruptible, or corrupted, or blackmailable, and among these there is Silvio Berlusconi, whole Mediaset group is really fragile, under siege by the French Vivendi, and having revenues from State concessions;

c) Movimento Cinque Stelle has transformed itself from a populist , but pure, movement to a group of careerist able to sell their mother for a place in a parliament

So the game is far more complicated 

silverer Tue, 01/23/2018 - 08:30 Permalink

Yeah, really. I get the feeling that because the Germans lost WWII, they're so subconsciously pissed that they think if they can't have it all, then they'll just ruin everything for everybody, even if it means taking out themselves to do it.

nuerocaster Tue, 01/23/2018 - 08:50 Permalink

Empire building fractures social compacts, promoting class envy, hatred, and warfare. It doesn't matter how you spin it. Super power, european union, globalism.

We had this little thing called communism that was avowedly globalist, based on class warfare, and screamed it on every street corner for a century.

But with some repackaging with platitudes and promises the race to sell out the people who voted for them is on.

Maybe the ruling class is right to loathe and despise the collateral damage masses.

In.Sip.ient Tue, 01/23/2018 - 10:42 Permalink

This:

"If they were all smart, they would have the Lira ready to deploy if things go south."

Is wrong! 

 

If their smart they'll have BtC or better still Ethereum ready to deploy.

You need to look to the future, not the past...

 

 

jrcowboy49 Tue, 01/23/2018 - 17:00 Permalink

The best option is to refuse to receive these invaders and eliminate all tax payer funded perks for them. Not only does illegal invaders cause fiscal strains on local and state governments, it puts your nation’s security in jeopardy and diminishes the rule of law and the democratic process as a whole. Allowing illegal invaders just encourages more invaders to risk sneaking in depressing wages and making it harder for the unemployed to find work.  They need to stay home and fix their own mess! They will not assimilate into your culture and bring radical islam and terrorism with them. Islam is not a religion of peace and demands the killing of Infidels. These radicals are conquerors.  Islam is a conquest ideology. It is not even a religion.  Not properly defining islam for the sake of political correctness will be to our own detriment. We do not need to expose our security to a radical muslim terrorist Trojan Horse! To surmise; we are paying our enemies to live amongst us. Never forget, the recovered Muslim Brotherhood manifestos explicitly states their undying obsession as the conquest of western civilization, and that they will accomplish that goal “From Within.”

Place Citizens First as they are being killed by people who shouldn’t even be here.

A Country needs to keep its own identity, culture, laws, customs, and keep its citizens safe from the evils and dictates of the new world order globalist idiots including its social media! Once you lose your Country, it is almost impossible to get it back. Think about that for a while.