ITALY BUNGA BUNGA
By Chriss Street
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 the only Italian Prime Minister to ever finish
a full five-year term. Shortly thereafter, Mr. Berlusconi was forced to
step down after this picture of his infamous Bunga Bunga alleged bondage and sex parties heated 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 downgrades 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 tourists dream. No matter how politically
corrupt is 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, a 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.
CHRISS STREET & PAUL PRESTON
Present
“The Agenda 21 Radio Talk Show”
Streaming Live Monday through Friday at 10 to Noon http://www.kcnr1460.com/
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