Italy Is Forming The Epicenter Of The EU's Fateful Shift

Authored by Tom Luongo,

Clarity is here in Italian coalition talks.  And the markets hate what they see.  So does Brussels.

Five-year Italian debt blew out over 1%, CDS spreads have moved over 20 basis points in a week. The markets are trying to scare these outsiders now in charge in Italy to soften their stances on reform and maintain a status quo which is destroying a great country and culture.

The League and Five Star Movement leaked demands for $250 billion in debt relief from the ECB.  There was also a demand for developing a mechanism for countries to leave the euro, according to a, now discredited, report from Reuters.

The final proposal doesn’t have any of this inflammatory language, but don’t think the leak wasn’t part of their negotiating strategy or part of where they are ultimately going to push things.

Because the rest of the proposal is already hostile enough to Brussels (see below).  And with ECB President Mario Draghi now signaling the need to consolidate European sovereign debt under its umbrella, it isn’t necessary at the moment.

Here’s Martin Armstrong’s take:

So everyone else understands what this is about, the ECB President Mario Draghi has come out and proposed interlocking the euro countries to create a “stronger” and “new vehicle” as a “crisis instrument” to save Europe. He is arguing that this should prevent countries from drifting apart in the event of severe economic shocks. Draghi has said it provides “an extra layer of stabilization” which is a code phrase for the coming bond crash. [emphasis mine]

That tells me that Draghi understands how bad things truly are and that Italian leadership knows they have the upper hand in debt negotiations.

They are prepared to push Brussels hard to get what they want.  And well they should.  League leader Matteo Salvini understands how ruinous the euro as administered by Germany has been for Italy and most of Europe.

So, to him, if the price for Italy to stay in the EU is to force the northern countries to accept debt consolidation and write-down then so be it.

If they won’t agree to that, then Italy’s new leadership is prepared to back to the people and say, “We tried.  Screw them. Let’s walk.”

All of this says to me they sand-bagged the press and the political establishment to get to this point.

Reconciling Divisions

The coalition proposal is a mishmash of right and left policy prescriptions that will drive the IMF and Brussels mad.  But, these two very different parties have to come to some agreement if they are to wrest control of Rome from the insanity of the status quo in Europe, which serves no one’s ends except the globalists which stand behind the public faces of the EU – Juncker, Merkel, Tusk, Macron, etc.

The League is a former secessionist party that served the northern regions of Veneto and Lombardy with talks of fiscal responsibility and far lower taxes.  The while Five Star Movement has grown out of the hollowing out of Southern Italy’s economy and social fabric from political rot emanating from both Rome and Brussels.

One is calling for lower taxes and regulation, the other wants generous pensions and universal income.  These are not easy differences to overcome. But they have, to no one’s satisfaction. That, however, is the price for such an eclectic mix of policy positions.

That said, they are clearly together on the two most important issues facing Italy’s future, immigration and Italy’s place within the EU.

Both parties want to put Italy first.  And the legislative program now proposed looks to be in that vein, while not looking (at first glance) too radical. From Zerohedge’s writeup this morning:

  • Seeks 15% and 20% tax rates for companies and people

  • Seeks guaranteed minimum income for poorer Italians

  • Universal basic income of €780 per person per month, funded in part through EU

  • Seeks end to Russia sanctions

  • No mention of a referendum on membership of either the EU or the euro

  • Agreement to meet the goals of the Maastricht Treaty

  • No plans to ask the ECB to cancel debt

  • Calls for airline Alitalia to be relaunched

  • Seeks to scrap Fornero pension reform

  • Flat tax to become a dual rate with deductions

  • Seeks a strong contribution to EU immigration policy

  • Plan calls for redefining of lender Monte dei Paschi di Siena’s mission

The highlighted ones are the most important, while the markets focus on the tax changes and universal income.

Forget those.  If Italy can get the EU to lift Russian sanctions, take immigration policy away from Angela Merkel and provide a blueprint for dealing with insolvent Italian banks those would be titanic wins.

These are the issues at the heart of the EU’s foundational problems – its lack of banking cohesion and anti-democratic bureaucracy.

The Soft Sell To Italeave

So, while all of this looks like they’ve caved on the most extreme positions, in effect, they have not.  Italy’s budget is getting crushed by the cost of Merkel’s Migrants.  Both parties obviously feel that growth can return to the Italian economy within the euro by radically lowering taxes to reprice Italian labor lower.  This would put it at an advantage relative to Germany while remaining within the euro.

Then issuing a new parallel currency, the Mini-BOT, to circulate domestically to lessen the need for euros within the domestic economy and free up Italy’s budget issues with respect to its debt servicing needs.

What I’ll say about that is with yields spiking, the Mini-BOT better get off the ground soon because Italy’s debt servicing is extremely low thanks to the ECB’s negative interest rate policy (NIRP).  And once the dollar begins rising here the decisions for debt relief and consolidation may be out of any one group’s hands.

Merkel’s Out of Time

The problem now is time.  Donald Trump’s pressure policy on Iran and Russia is creating the kind of uncertainty no one can forecast.  It is forcing a decision on European leadership to come together and declare opposition to Washington’s diktats and forge an independent identity while at the same time look to truly end the cultural divisions and distrusts which have led to this moment thanks to a lack of fiscal unanimity.

It is clear to me Italy’s new leadership understands this with the sum and substance of these policy points.  It believes it can re-align Italy’s domestic policies in Italy’s favor while forcing Brussels to face the responsibility of leading Europe forward in a way which is far more equitable than in years past.

Perhaps that’s why Angela Merkel visited Russian President Vladimir Putin for a second time in two weeks after only sending representatives for the past four years.  They weren’t just talking about the Iran deal.

No that meeting was all about getting Germany out from under Trump’s thumb while not incurring his wrath.  Putin’s long-game of diplomatic patience was the right path from the beginning.  It’s always bet to let your opponent bluff and bluster, beat their chests and make demands they can’t enforce.

Eventually those watching realize it is all just hot air.  And as time passes the cost of resistance to the bully falls and the benefits of joining a new group rise.  For Germany it is energy.  Russian Gas and Iranian oil are necessary for Germany to maintain its competitiveness and Trump is undermining both of these with his lack of diplomacy.

Merkel’s refusal of his proposed tariff concessions to ditch the Nordstream 2 pipeline and buy more expensive LNG from Cheniere Energy was more important than people think.  There’s no reason for Merkel to believe that U.S. policy under Trump or any future president won’t do an about face.  Meanwhile, pipelines are practically forever.

And Merkel is savvy enough to put her ego aside over having been outmaneuvered by Putin over Ukraine and hold the line on Nordstream 2.

The Big Reversal

Merkel has an out here. And Italy just handed it to her.  I’m not sure she’s smart enough to see it.

The ECB wants debt consolidation and greater control.  For the EU to survive this is necessary.   Germans and the rest of the northern countries don’t want to be seen bailing out the “Club Med” countries.  That would be interpreted as yet another submission to Washington and New York.  Merkel cannot go through horrific debt relief talks like she did with Greece in 2015.  It would destroy what’s left of her political capital.  If she stands tall against Trump over Iran, however, she gains a lot.  The uncertainty over how Trump will react sends the euro down, pressuring the ECB to finally move on dealing with the debt.

Europeans want normalized relations with Russia and open trade, especially German industry.  There are tens of billions in investments in Russia and Crimea waiting for the sanctions to end to travel to Russia, especially with such a weak Ruble, thanks to Trump’s moronic sanctions.

Only Poland and the Baltics don’t.  But, they don’t matter.  It only takes one finance minister to vote against extending Russian sanctions to end them.  If Merkel stands up to the U.S. on Iran, it makes it easier for Italy to force Germany to stop bullying everyone into maintaining them.

Italy drops the bombshell to end the Russian sanctions in July.  Merkel “reluctantly” goes along with this.  Nordstream 2 worries go away. The EU and Russia form a united front against more U.S. belligerence in Ukraine.

During Monte dei Paschi debt restructuring talks Merkel and Draghi introduce new mechanisms for debt consolidation as a model for the future.

Do I think this is the most likely scenario?  No. But it is one that could come to pass if Merkel reads the shifting political winds properly.  If she begins thinking in Germany’s best long-term interests then some version of this is exactly what she’ll do.

And she’ll have the hated euroskeptics from Italy to thank for saving her legacy and Europe from further political and economic marginalization.


Lumberjack sheikurbootie Sun, 05/20/2018 - 10:45 Permalink

Especially in the Wind racket like IVPC/UPC.

Founded in 1993 by Vigorito and UPC's Brian Caffyn, IVPC kick-started the Italian wind sector. By end 2008 it had developed and installed around 1 GW of wind capacity, about 27% of Italy's total installed capacity of 3.7 GW by that time.

in other news...

Ex-State Street employee accused by U.S. of defrauding insurer

In reply to by sheikurbootie

iadr Klassenfeind Sun, 05/20/2018 - 15:59 Permalink

  another doom-porn bullshit piece from Tom Luongo

Did you and I read the same article? The one above is utopian, hopeful, more than a bit naive. Probably the least doom-inspired piece on here in weeks.

Anyway, by the flag aren't you and the Nord League pretty much on the same page *anyway*? What is with you- Scared of competition? Scared of not being able to continue financial rape of the remainder of a continent?

In reply to by Klassenfeind

chubbar Lumberjack Sun, 05/20/2018 - 11:44 Permalink

"If Merkel starts thinking in terms of Germany's long term interests"??? You have to be kidding? Merkel is single handedly responsible for tens of thousands of rapists, murderers and thief's being allowed to immigrate into Germany along with hundreds of thousands of other muslims who have no fucking intention of assimilating into Germanys traditions and society. How the fuck can anyone believe this is in Germanys "best interests"? Merkel has an agenda that isn't easily discernible, who the hell knows what this traitor will do next? Regardless of what she does, I can guarantee it isn't because it's in Germanys best interests!

In reply to by Lumberjack

BarkingCat InnVestuhrr Sun, 05/20/2018 - 15:16 Permalink

Germans don't elect her. She is put into that position by her party. As a matter of fact her political party has never won a majority of vote in any election. Which means she always had to have a coalition government and her coalition partners have to agree for her to become a chancellor.

But the Germans should have been smart enough to know that voting for her party would result in her continuing to govern the country. So, one third of the nation's as dumb as a box of rocks.

In reply to by InnVestuhrr

el buitre BarkingCat Sun, 05/20/2018 - 19:09 Permalink

Merkel's agenda is the Rothschild agenda, made most obvious by their infamous lieutenant, Georgi Schwatz.  Her problem today is that if she keeps up the Rothschild agenda, the German people will finally dump her.  Her hold on power at the moment is tenuous to say the least.  How many months did it take Germany to form a new government after the last election?  Another election and she is finished.  And the EU is just waiting for the coroner to sign the death certificate.  Prince Draghi is just trying to stop the debacle until he can exit stage right at the end of his term.

In reply to by BarkingCat

Faeriedust chubbar Sun, 05/20/2018 - 16:00 Permalink

Merkel was raised from infancy to adulthood -- three years into postdoctoral research -- in EAST Germany, totally dominated by Russia.  If the Jews and Americans laid on the war guilt in West Germany with a trowel, the Russians laid it on with a forklift.  The woman was brainwashed from the age of 6 months to believe that Germans are communally and genetically GUILTY for ALL the deaths of World War II; and that their original sin lay in elevating their own nation, culture, and gene stock above that of others.  She can't escape that; she can barely question it, and that in silence in the privacy of her own thoughts -- maybe in the toilet.  Not only is questioning that guilt in public a criminal offense in Germany, but she is also a minister's daughter, again, cradle-bred to Love Thy Neighbor.  Rational thought doesn't break through intense, preverbal childhood training like this.  Even if the victim is confronted with perfectly logical reasoning; even if her brilliant rational mind (the woman DID study quantum chemistry professionally) admits the superiority of the argument, the emotional mind continues to reject it.  This is not a person who can EVER wrap herself around a nationalist perspective or reject the claims of foreigners to access her nation's wealth.  She is a tool custom-made by the combination of Christian and Communist propaganda to serve the internationalists.

In reply to by chubbar

TruthHunter chubbar Mon, 05/21/2018 - 07:41 Permalink

Merkel is invested in the global agenda so has to accept massive immigration. I believe Soros is the architect of this disaster. A year before the refugee crisis, I saw a interview of Syrian refugees in Lebanon.The women were saying the stipend had been cut so the men would have to look for work in Europe. This was deliberate. Before this, they wanted to stay close in the hope of returning postwar.  It would've been far cheaper to maintain them in the camps than assimilate them in Europe. It was a deliberate policy to force them to the EU.

There is a level above which refugees/ immigrants aren't assimilated.(Miami for example. Elsewhere, Hispanics are assimilated by 3rd generation. Outside of Dearborn, few Muslims will maintain their distinction after 3 generations.

Europe has allowed far more refugees than they can assimilate.

In reply to by chubbar

sandraloopz0 Arnold Sun, 05/20/2018 - 12:27 Permalink


I am creating an honest wage from home 1900 Dollars/week , that is wonderful, below a year agone i used to be unemployed during a atrocious economy. I convey God on a daily basis i used to be endowed these directions and currently it's my duty to pay it forward and share it with everybody, Here is I started.....


In reply to by Arnold

gregga777 sheikurbootie Sun, 05/20/2018 - 11:29 Permalink

…Italy running anything can't be good. 

Heaven is where the police are British, the cooks are French, the

mechanics German, the lovers Italian and it's all organised by the



Hell is where the chefs are British, the mechanics French, the

lover's Swiss, the police German and it's all organised by the Italians.

In reply to by sheikurbootie

veritas semper… sheikurbootie Sun, 05/20/2018 - 12:51 Permalink

Italy has one of the best : food , construction , designers, fashion, music , architecture , literature ,cars; Italians have the highest IQ ( higher than Americans ) .

Italy has a surplus in trade ,ranked number 10 , has 52 Bil + ; see where US is :…

The western civilization is based on the Roman culture and legislature.

So ,FO with your ignorant comments.

have you been to Italy ?

In reply to by sheikurbootie

BarkingCat veritas semper… Sun, 05/20/2018 - 13:06 Permalink

And Roman culture was based on the Greek.

Yes, the Italians have the highest average IQ in Europe. They have produced some of the last epoch's best known geniuses. However, they have not been very impressive over the last few centuries. Maybe that average IQ is too concentrated along the center of the bell curve, which gives you an intelligent population but lacking large number of extremly intelligent people.

I don't know.  I have not seen the actual numbers besides the single point of information presented as average IQ.

Additionally,  average IQ of Americans is lower than many European countries. If I recall correctly, it is listed as 98 while Britain is 100 (or was before they started importing 3rd world street shitters).

I bet American IQ is probably about 90 given the shift in demographics that has happened.

In reply to by veritas semper…

InnVestuhrr BarkingCat Sun, 05/20/2018 - 13:49 Permalink

I learned the realities of Italy too well so I had to depart.

The great anchors holding Italy back/down are:

1. Too much corruption in governmental process, including organized crime and petty domineering bureaucrats making their useless jobs essential and labor unions holding everyone hostage to their demands.

2. Too long and deep subservience to the catholic cult and all of its hyper-breeding closed-mindedness, which has resulted in massive over-population and intellectual following vs leading.

3. Too many people who want free stuff from wherever they can get it, government or crime.

4. Absurdly ancient severely limiting infrastructure, including road capacity.

5. The suffocating crushing level of taxation.

But the Italians are astonishingly clever, creative and resourceful - if I needed the most innovative thinkers for a project, Italy would be my first place to recruit.

In reply to by BarkingCat

iadr InnVestuhrr Sun, 05/20/2018 - 16:09 Permalink

4. Absurdly ancient severely limiting infrastructure, including road capacity.


IDK, it ranked very very highly on one of those international NGO/UN offshoot charts of transportation infrastructure ratings.  When your country looks like a 1000KM (or whatever) long pier on a map, maybe different interpretations of what transportation infrastructure is "workable" come into play, mmm?

Driving from South to North is NOT the be all and end all of if it's good. Nor even is driving around it's cities efficiently. Burning buses, ok. Tired railways?  What is your "beef"? Be specific.

In reply to by InnVestuhrr

InnVestuhrr iadr Sun, 05/20/2018 - 16:15 Permalink

Italy,  intially under Mussolini, built the Autostrada that the NGO/UN refer to in their praises of Italian road infrastructure.


Get off the Autostrada and try to drive through the towns and cities whose roads were laid out centuries ago for donkey carts, especially if you are driving a vehicle larger than a Smart, or towing a trailer, and you will know how anchovies in a flat tin feel.

Then there is also plumbing, nat gas, electric, internet, etc etc all trying to snake through the ancient mess under the constraints of the antiquities preservation laws.

In reply to by iadr

veritas semper… BarkingCat Sun, 05/20/2018 - 16:55 Permalink

The Greek culture was elevated to genial status by the Romans.

Italy is able to export high quality products , having a + 52 Bil in trade.

So ,I say they are pretty impressive(considering the size of the country) . where is America with its advantage given by 320 Mil people and the international reserve currency ,the petro-f*cking -dollar? Still ranking last with - 462 Bil deficit.…


In reply to by BarkingCat

Son of Captain Nemo KingTut Sun, 05/20/2018 - 14:02 Permalink


Excellent point you make.  They are virtually one-in-the-same given their creativity and industrial capacity that far exceeds everyone else within the Brussel's "cabal"... Which is why they never should have signed up to the Rothschild/ Soros $BUS in 2002 which destroyed what opportunities "might have been" had they not made the fateful error to involve their banks with financing the American war machine!... Case in point the losing battles (…) that go with the "war on terror" that only get worse and more expensive as their German economies money continues to get sucked into it (…)!

Having said that as I didn't round out my comment sufficiently they also carry the largest "BAGGAGE" of debt.  And if they were to decide tomorrow to abandon it for the Deutschmark the rest of Europe would follow suit in going back to THE ONLY SOVEREIGNTY THAT DEFINES YOU...


Sooner or later it's going to happen!... With our without the U.S. involving them in a World conflict.  If they are smart they will tell the U.S., UK and Israel to get the fuck out of there Country after 73 years of occupation.... And take their chances with the new Europe and cheap energy (…) that is East which is the ONLY viable option given all their mistakes!

In reply to by KingTut

yvhmer KingTut Mon, 05/21/2018 - 07:14 Permalink

Yes, so it may seem. But it is not. The issue is who controls the money policy. In case of the DM,  it was the people because the constitutional court to intervene if all else would fail. 

In case of the Euro, it concluded it could not intervene. 

So although the Federal Republic of Germany may be quite influential in shaping the Euro/ EU policies,  it is integrated in a larger framework. 

Simply imagine the difference,  had FRG en The Netherlands kept their local currencies side by side the Euro . The DM and the Florin would have appreciated against the Euro , making a transfer of wealth from North to South impossible . 

So, now the Germans and the Dutch are footing the bill....and it will not be so much in terms of currency that will never be recuperated, but all the work, the economic energy it represents, that does not benefit those who helped create it. 

See the target II balances and you see the footers of the Euro bill and those that live off it. 


In reply to by KingTut

cwsuisse Sun, 05/20/2018 - 10:50 Permalink

The simultaneous use of the words "Draghi" and "understands" is an inherent contradiction because he does not understand anything. He stupidly believes that the central bank that leverages up the most is going to be the winner in this race to the abyss. I don't have any reason to believe that Merkel cares whether the Crimean peninsula is inhabited by Russians or Ukrainians. She joined the sanctions because she was always following US-geopolitcs. It remains to be seen whether she is willing and capable of gathering the strength to kick Uncle Sam. 

SDShack cwsuisse Sun, 05/20/2018 - 13:55 Permalink

Yep, the USSA Security State is the ONLY thing that matters and is calling the shots world wide. They MUST protect the Petro$ at all costs, and will do ANYTHING and sacrifice ANYONE to support this. USSA "allies" understand this and also understand how they will be "persuaded" to act in the USSA interest if anyone else tries to entice them otherwise. How many military bases does the USSA have in Germany and Italy? Nothing changes until that changes.

In reply to by cwsuisse

Idiocracy Sun, 05/20/2018 - 11:16 Permalink

The coalition contract between the 5 Star Movement and the League (2 anti- establishment parties) stipulates in writing that NO Freemasons may be ministers of the new Government. This is revolutionary. This is ground breaking. Italians are fantastic engineers and artisans. They can smell corruption a mile away.

Batman11 Sun, 05/20/2018 - 11:32 Permalink

2014 – “85 richest people as wealthy as poorest half of the world”

2016 – “Richest 62 people as wealthy as half of world’s population”

2017 - World's eight richest people have same wealth as poorest 50% 

When we say the markets, it could just be eight people that don’t like what is going on in Italy.


KimAsa Sun, 05/20/2018 - 11:48 Permalink

Haha- this is the exact same situation Spain found itself with Catalonia regarding its debt.  Spain needs Catalonia more than Catalonia needs Spain, and the ECB needs Italy (and all other indebted EU countries) more than Italy needs the ECB (or the euro zone).  Big middle finger to the money changers and debt mongers.


(loan a man $2000 and he has a problem.  Loan a man €200 Billion and you have a problem.  Haha)

my new username Sun, 05/20/2018 - 12:17 Permalink

Dead in 6 months. They will collapse.
The EU destroys countries by regionalizing them, except Germany, which sees itself as the beating heart and the model of the EU.
All regions will become provinces of Germany. The Northern League is closer to Switzerland and France than it is to Rome.

Rocco May Sun, 05/20/2018 - 12:25 Permalink

Merkel visited Putin two times in two weeks LOL! Now the Russians are no longer the Nazis. But the chess player has a good memory. I hope that Putin throws out this communist slut Merkel.

“Italy Is Forming the Epicenter of the EU's Fateful Shift”- that's good news.