November 1, 2014
About two weeks ago I found myself in a conversation with a lady at a dinner party. She spoke at length about Italy and kept repeating more and more loudly that “Italy has collapsed”. That may be true. In trying to make her understand my slightly more nuanced position I made the point that the word “collapsed” suggested that it was over, past tense, finished, but since there seems to be no real plan to fix the huge systemic issues, Italy would continue downwards for some more time to come. The bottom has not yet been reached and may not be for a long time.
Not being or speaking Italian I follow the news via English language press outlets, such as this article, but nothing I read is positive.
What worries me is that with such a large public debt, an economy that has been struggling for more than a decade, high unemployment and an overly complex political gridlock that nobody, except perhaps for Berlusca, can rally together, can the eurozone escape Italy?
With national balance sheets straining and wheezing from the pressure added by all the previous bailouts, is Europe able to handle a much larger nation, such as Italy, needing a rescue?
My guess is that it cannot. But, since Italy seems to be nowhere near the end of its downward economic slide, can it be escaped?
Perhaps the next round of bank stress tests should be for European central banks to see what happens if or when Italy needs to be rescued…?financialguy