I’m an Italian citizen with some understanding about what’s going on in my country. This post is an open letter to you and to the people at Business Insider. I have just read this article (LINK), where my country is poised as the next big threat to Eurozone and to the sheer existence of the Euro currency.
The basic assumption is that the referendum that will be held in November is crucial to the leadership of our PM, Matteo Renzi, and for the stability of the Italian cabinet. If the referendum will go against the will of the national government, that’s your message, everything will fall apart in Italy, leading to a major disaster in the Eurozone.
In the linked article from Business Insider, there is also a summary of the worrying state of our bank sector, which is a major force in our economy.
Well, there are a few things to be considered.
First, it was Matteo Renzi that linked the survival of his cabinet to the outcome of the referendum. A number of other politicians said the same, in order to show their will to support our PM to the end.
Nobody forced Mr. Renzi to display such behavior, it was his own will to associate his political career to the proposed constitutional reforms. Don’t worry about it. Mr. Renzi is an Italian politician. Words like “resignation” simply aren’t considered.
Second, the referendum was not optional. For our laws, a constitutional reform should be backed by two-thirds of or more of the components of our Senate and House of Representatives. If this consensus is not achieved, then a referendum should be held, leaving the choice to the people.
Third, the proposed set of reforms is not what’s needed to push up our national economy. The announced effects on public expenses are minimal and the decisional process will not get better.
Fourth, the Renzi cabinet is the third in a row of government nominated by our President of the Republic and confirmed by a Parliament elected with a law that has been pronounced as partially unconstitutional. If Mr. Renzi ever resigns, President Mattarella will nominate somebody else to form a new cabinet.
Fifth, the theory of falling dominoes (Renzi-government-economy-banks-Eurozone) is weak at best. No matter who’s in charge in Rome, the ECB is directing every single step of the Italian economy. We have a total of five banks that are on the brink and the biggest one, “Monte dei Paschi”, is already in the hands of the State. The Atlante fund will be used to save four minor players and avoid more noise on the markets.
Finally, a word about what is reported worldwide about our banks.
It’s quite curious that Deutsche Bank, that is currently under investigation for a number of reasons – including frauds, is seen as an influential voice about other banks.
Mr. Stiglitz, I know for sure that you are one of the few that are able to see the “big picture” of the world economy.
I also know that you’re right about the many failures of the Eurozone and about the danger of an implosion of the whole Euro currency system. In my opinion, it will not come from a referendum in Italy. Look at the big players and about the mass of the debt worldwide. when that mountain of paper will crumble, that will be the end of this mad game.