The Italians are electing their 63rd government in the last 68 years. This annual anarchy was only interrupted once since World War II, when Silvio Berlusconi from 2001-2006 became only Italian Prime Minister to ever finish a full five-year term. In 2011, Mr. Berlusconi was forced to step down after this picture of his infamous Bunga Bunga alleged bondage and sex partiesheated up tabloids around the world.
In most years, Europeans chuckle about this type of instability: “it’s an Italian thing”. But by controlling 16% of the European Union’s GDP, political trouble just became European economic trouble as Italy’s debt was downgraded to BBB+ and a growing Italian bank run seems to have begun. The realization that Italy is even too big for Germany to bail out seems to have sparked yesterday’s 5% crash in German stocks and is again heating up the European financial crisis.
Italy is a businessman’s nightmare and a tourist's dream. No matter how politically corrupt the economic environment, beautiful Italian girls will be decorating the outdoor “Café Society”, while wearing the latest designer fashion. The central government in Rome tries to balance the general needs of the country and the interests of local powers, which range from local, regional and national political leaders to labor unions, the Catholic Church and the various criminal organizations that operate in the country.
Approximately 45 million Italians may physically show up at 61,225 polling booths across Italy to select 630 members of the lower house Chamber of Deputies and 315 members of the upper house Senate for the national parliament by selecting from lists headed by 32 candidates for prime minister. Another 8 provincial presidents and 426 mayors will also be elected. The 2.6 million registered Italians living abroad can vote for an additional 12 members of the lower house and 6 members of the Senate.
Financially, the fertile and industrialized north is one of Europe’s richest regions and the arid south is one of the continents poorer regions. The prosperous north practices sophisticated tax evasion and the south benefits from state subsidies and organized crime. But by embracing the German dominated euro currency in 1999, Italy enjoyed a decade of economic stability through a 300% increase in borrowing.
Those days of wine and roses ended abruptly in 2011 as the European debt crisis hammered Portugal, Italy, Greece, and Spain, now known as the PIGS of Southern Europe. This week the country’s top business federation, Confindustria, said the economy is caught in a “vicious circle” where 29% of companies cannot meet “operational expenses”, frightened banks refuse to lend more money, 1,000 businesses a day to go bankrupt and the banks are rapidly going bankrupt.
Big industrialists, such as Fulvio Conti, head of the energy group Enel, said firms are dying from lack of liquidity and called on the Bank of Italy to take bold action to be the lender-of-last-resort to head off a disaster. But a leading cause of companies lacking liquidity is often the Italian government that is $59 billion in arrears in paying its vendors.
The Italians, like the other 25 members of the euro currency always assumed that if they ever suffered a financial crisis they could rely on the Germans to bail them out. Since 2009, the Germans controlled European Central Bank (ECB) was instrumental in restructuring debt for the little economies of Ireland, Portugal and Greece. Last September the ECB calmed financial markets by announcing a new government bond purchase plan which brought down the cost of selling bonds for Italy and Spain. But last month Germany shocked financial markets when they refused to bail-out tiny Cyprus and forced the government to expropriate a percentage of all their larger bank deposits.
The credit rating agencies and Italian bank depositors now know that there is no way Germany would or even could bail-out the 7th largest economy in the world. During January and February, Italian bank deposits shrank by 2% each month. But with Cyprus and the debt downgrade, many Italians are withdrawing large amounts of cash in a “flight to safety” to neighboring Swiss banks. With German investor beginning to panic over Italy’s problems, the “vicious circle” in Europe just got allot wider.
Beat The Fed
Golden Eagle Coins
Chameleon John Coupons
Calling for Contributors!Got something to say?
We want to hear from you.
Submit your article contributions and participate in the world's largest independent online news community today!