by Tom Luongo
December 5, 2016
is a contributor for
Planet Free Will.com.
He is also
a Senior Financial Editor at Newsmax Media, Author of
Resolute Wealth Letter
contributor at AOL Sports.
Professional chemist, amateur dairy goat
and outspoken Austrian Economist.
Minister Matteo Renzi
will step down after
failing to secure
an overhaul of the
Italy went to the polls and gave its Prime Minister and, by
extension, the European Union a big thumbs down on
Sunday. The referendum to radically overhaul Italy's government
This sent the euro plunging through near-term support at $1.055
versus the U.S. dollar.
Renzi said he will step down today and allow a new Prime
Minister to be found. Major opposition parties, the Lega Nord
and Five Star Movement (M5S) are calling for new elections to
be held as quickly as possible.
Both of these are fervently anti-EU parties of the so-called "Far
Right," because any idea or party that is outside of allowable
cultural Marxist limits needs to call up ghosts of fascists-past.
The reality is, of course, far less
ominous, unless you are a
member of the Davos set.
Par for the
Italy has had more than sixty governments since the end of World War
II so the Renzi government lasting just two years is actually quite
Italians are fed-up with
the European Union. That disgust has risen since the first
Greek bailout in 2010.
Early in 2015 Venice voted to secede from Italy and was promptly
ignored. This is similar to the unelected technocrats in
Brussels continuing to ignore Catalonia even though the people
there continue to move forward.
The rise of
M5S was inevitable from the moment
Silvio Berlusconi was ousted as Prime Minister and
Goldman-Sachs squid Mario Monti installed in 2011 to oversee
the Trokia's (The EU, IMF and ECB) austerity plans for dealing with
Italy's intractable debt.
M5S won the race for mayor in Rome earlier this year and has been
leading in the most recent national polls. So, at this point, if a
caretaker government does not form, snap elections in 2017 will most
likely bring M5S to power.
With this vote, backed strongly in the northern states, there is a
high probability that M5S and
the Lega Nord would form a stable
government as they should garner a majority.
And this is a majority capable of
holding a successful national referendum on ditching the euro and
returning to the Italian lira.
The EU brought this on themselves with how it treated its members
during bailout negotiations in year's past.
As I alluded to earlier, Italy never
wanted the bailout forced on it by the Troika. This is why
Berlusconi was removed and Monti installed.
And that strong-arm move which, like in Greece, saw none of the
money go to Italians. Some understood the bailout was for the banks
who held the debt. Berlusconi wanted to take Italy out of the
euro-zone and re-institute the Lira.
But the timing was wrong...
But that didn't happen. And it set the stage for yesterday's revolt.
We've seen this story play itself out in countries all across the
West. A we'll see it will happen again in 2017 and 2018.
For now, the EU has a real existential
threat to deal with.
Why? Because Italy's banks are insolvent...
It's eight biggest banks need massive
infusions of capital to even remain open at this point. What
retributive-minded polls in Berlin and Brussels have to accept is
letting them fail is a mutual suicide pact.
Activating 'bail-in' clauses would be tantamount to war. The main
depositors in Italian banks are Italians, not big multi-nationals or
foreigners. A bail-in, confiscating deposits, would ensure for
generations enmity between Germany and Italy.
The EU was supposed to end this kind of thing, not encourage it.
Because the biggest banks outside of Italy in Europe are the ones
exposed to massive shifts in both interest rates on the debt and the
euro exchange rate. And the biggest one exposed is Deutsche Bank.
For a New
M5S can argue, quite convincingly, that Italy's creditors have been
repaid handsomely thus far. The outstanding debt is mostly interest
and penalties forced on it by the Troika.
Those debts are choking the Italian economy and, by extension,
destroying its banks.
Then Italy leaves the euro, brings back the Lira, which likely falls
in value. And the government decides then what, if anything, it will
repay. It will do so in Lira versus higher-priced Euros, paying back
Sunday's referendum means confrontation between Italy and Germany
over Italy's debt. It is happening against the backdrop of a similar
revolt occurring in France and the Netherlands during the first four
months of 2017.
No wonder German Chancellor Angela Merkel is thinking of
deporting some refugees.
But, the avalanche against her
European Union has started and it doesn't matter what the pebbles,
like her, have to say about it...