FinancialGuy Writes!

The election result in Italy, when combined with the obvious horrors of mass unemployment in a number of countries, real financial hardship for many and a growing number of corruption scandals (listed here) might just be the beginning of the end.

With Beppe Grillo’s party taking the largest slice of the vote it is hard to believe that further austerity will be possible to apply in Italy. The ECB, Angela Merkel, the Commission – or even the Troika – can say what they like but they will not be able to enforce it. This will likely lead to other countries trying to renegotiate the terms of their own austerity.

What started as a banking crisis and became a sovereign debt crisis is now a social crisis caused by high unemployment. In Italy that has lead to a political crisis (the latest in a long line of governments to fall).

I’m starting to think that time is almost up for the banks. It was clear in 2008 and 2009 that reform was needed. Like an ostrich, many put their head in the sand to try and ignore the signs. There have been many situations where banks have been forced into changes, but too many seem to be in denial and hoping for a return to the good old days. Those days are over.

While it is clear why they would want to see thoughtful and careful legislation in place rather than some knee-jerk reaction, time has passed and many have not moved anywhere near quickly enough, either to reform their corporate governance or to improve their balance sheets. The problems in Spain and the fear of a banking union in Germany would seem to back up this assertion.

My guess is that the banks have around 12 to 18 months left under the old system. The new system will be built around very strict rules governing bank behaviour, entire populations that wish to see them reformed, very large numbers of unemployed voters that hold them responsible and want revenge which will be delivered by more and more politicians like Beppe Grillo that will turn the establishment on it’s head.

Their political protection will soon be gone in many countries and it will be replaced by politicians representing voters that actively wish to see debt default, banks fail and bankers in prison. The clock is ticking.

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