Brussels bureaucrats have been worrying about the effects of Brexit; but Brexit Smexit, there is a whole larger whirlwind now raising itself across the Mediterranean in Italy.
Just like in Britain in 2016, there appears to be another battle underway between the Establishment and the People.
The markets took a hit yesterday after the prospect of yet another Italian General Election loomed; frightened investors began to sell Government bonds as confidence fell.
Politically and economically, the stakes are much higher than, say, in the Greek crisis. Italy is, after all, one of the six founding members of the EU and is the eurozone’s third largest economy.
READ MORE: Uncertainty in Italy helps knock £25 billion off FTSE-100
What is happening in Italy echoes to some degree the debate that we had in Britain two years ago: who has control.
The anti-Establishment populists, the Five Star Movement[M5S] and the League, who won the election, want to ease the EU economic straitjacket. They chose as their Finance Minister Professor Paolo Savona, an 81-year-old economist, whose Plan B, if reforms could not be secured, was to pull Italy out of the euro altogether.
President Sergio Mattarella vetoed the appointment as he believed it threatened his country’s economy, underpinned by its eurozone and EU membership. M5S and the League smelt a rat and believed Berlin was behind the rejection of Prof Savona.
READ MORE: Italy goes to the polls in the shadow of Mussolini
The new Prime Minister-designate is Carlo Cottarelli, an IMF veteran with close ties to the Eurocrats in Brussels and who is solidly pro-euro and pro-austerity; indeed, he is known as "Mr Scissors" because of his penchant for cuts.
While the M5S and League want to reform the economics of the eurozone, the big question is, if in the wake of their likely re-election this autumn, Brussels, or more pertinently Germany, simply says No to change, what then?
If Italy decides, on a wave of disgruntlement, to go back to the lira, this would send an economic earthquake across Europe and beyond.
Italy’s current £2bn debt lies in many pockets across Europe and beyond. If the markets took fright, as is highly likely, then Italy’s old/new currency would collapse; contagion would begin to spread like wildfire.
Fidelma Cook: On the rise of the Far Right in Italy...and the Brexit connection
Just as in 2008, the financial system would seize up as panic set in, leading inevitably to another raft of recessions with all the dire consequences, economic, political and social, that would bring.
George Soros, the pro-EU billionaire, yesterday said the EU had an “existential crisis” and needed to “reinvent itself” to make it more attractive for countries to stay in. Time is of the essence.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereLast Updated:
Report this comment Cancel