Italy Confronts Germany, Adding Additional Euro Pressure
By Staff News & Analysis - June 13, 2013

Italian showdown with Germany over euro looms closer … Italy's simmering revolt against Germany, austerity and its own ultra-European elites is coming to a head again, in a reminder that the deep clash of interests between the euro's north and south remains as bitter as ever … Silvio Berlusconi called for a showdown, or 'Braccio di Ferro', with northern powers before Italy loses its chemical, car and steel industries. – UK Telegraph

Dominant Social Theme: A lot of trouble in Europe, but the great experiment still stands!

Free-Market Analysis: Greece has been relegated to the status of a Third World country, the complicity of German leaders with the ever-inflating ECB is due for a judicial hearing, British leaders are committed to a referendum on whether Britain should pull out of the EU entirely, Spain is broke, Portugal is busted … and Italian leaders are getting ready to square off with German bankers over "austerity."

That the euro has not always suffered some breakdown is testimony to the power of its globalist backers. It has, however, bankrupted half of Europe and even the healthier northern half is not happy with what Europe has become and is continuing to become.

There is great discontent in Germany with the prospect of continued German economic responsibility for the rest of Europe and France. Meanwhile, the other "engine" of Europe has been given two years to impose fiscal discipline by the IMF or face a variety of broad consequences.

The euro is surely to blame. Fiat currencies are notoriously volatile but add in dozens of separate financial policies for those that are members of the eurozone and you end up with virtual chaos.

Germany wants a strong euro and maybe so do some of the other Northern Europe countries. But a strong euro means that Southern Europe cannot inflate away government profligacy – the single best measure for living with eternal monetary debasement. And voters living in countries that have not yet been thrown into mortal chaos like Italy are finally beginning to grasp the extent of the danger they are in.

And thus Italy's politicians – at least some of them – are attempting to extricate Italy before the worst happens. Here's more from the Telegraph article:

Something snapped in the Italian psyche last week after the European Central Bank offered nothing to combat the credit crunch asphyxiating small business, and more broadly washed its hands of Euroland's incipient deflation crisis and catastrophic wastage of its youth. The next day ex-premier Silvio Berlusconi called for a showdown, or "Braccio di Ferro", with northern powers before it loses it chemical, car and steel industries altogether.

Mr Berlusconi told Il Foglio that Italy's government – which his Liberty Party keeps in office – is complicitly serving forces that are destroying Italy. It must instead confront the north, "and particularly Angela Merkel's Germany", with a stark choice: either they call a halt to fiscal and monetary contraction, and opt instead for full-blown reflation; or they must expect the victims to snatch back their own destinies.

The battle must be waged quietly, but implacably. Italy cannot let its productive base atrophy further, or allow itself to be sidelined by the "hegemonic methods" of those with the upper hand. "That is what I mean by a showdown. We must find our own national or regional solutions, breaking up euro mechanisms."

The business lobby Confindustria is no longer so far from this belligerent position. "We have shown our willingness to sacrifice, but we must say no to austerity that reduces our companies to their knees and lets others snap up our prize assets at bargain prices," said Giorgio Squinzi, the group's president.

… The EU's prescriptions have been self-defeating even on their own terms, leaving aside the "hysteresis" damage of a youth jobless rate near 41pc. He said fiscal overkill that was intended to bring debt under control has instead caused the debt-to-GDP ratio to soar under Mario Monti from 117pc to 127pc, and 132pc this year.

… Italy faces horrible choices … It would take a united Latin bloc to force a policy change, and that is precluded as long as French president Francois Hollande cleaves to the Franco-German axis, believing that France can withstand the rigours of a deflation regime. If Italy opts for defiance, it must be prepared to go it alone and have its bluff called. It must really be willing to leave EMU.

A game theory study by Bank of America found that Italy would benefit most among big EMU states from a euro exit. It has a primary surplus, so it would not face an instant funding crisis. It has fat gold reserves, providing bond collateral that could be used to raise €400bn in a crisis. Italian household wealth is €275,200, compared with €195,200 for Germany. A basket case it is not, and Italy's industrial barons know it. The country has one great structural problem: it is in the wrong currency …

This latter information is quite instructive, if accurate. What is at stake is the ability of Italy to survive as a cohesive entity. In the modern era, centralization has been made into the ultimate goal of nationhood. It is a chimera, a falsehood, but that is what the Italians are stuck with right now.

In the 1800s, the Italians, and to some degree the Greeks and Spanish, were "centralized" via language and the political process. Because such centralization is antithetical to the larger southern culture, a kind of deal was struck. The central governments of Southern Europe maintained calm by not imposing overly aggressive taxes and regulations on their citizens. Instead, they focused on creating a "nanny state" buy-in.

But now the second phase of what would appear to be a globalist strategy is at work. The velvet glove is giving way to the proverbial iron hand. Under the IMF's brutal tutelage, Southern European governments are hiking taxes, expanding regulation and diminishing government services.

Southern European cultures are to feel the boot on their collective neck in no uncertain terms. The European Union and the euro are to be emphatically defended by Eurocratic rigor. As it was in pre-war Germany, there can be no real deviation from the course the state has set, in this case Brussels.

But Greece, Spain and Italy are – as we have always pointed out – uneasy coalitions of disparate tribes. France is slightly more cohesive but that does not mean it will remain any more peaceful. The bargain that was made was between an unaggressive central government and tribal cultures that accepted the largess of democratic socialism.

All that has changed now. A war is being fought now between those who want to impose tighter authority on Southern Europe and the chaotic tribes themselves that have demanded unacknowledged but viable quasi-autonomy.

Until now, this war has been played out with the assumption that the Southern PIGS will need to adapt to the demands of the euro. But this article shows us that the subterranean war between North and South is entering a new stage. It is becoming, perhaps, an overt "shooting" war, metaphorically speaking.

After Thoughts

This will surely mean even more pressure on the euro.

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