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Could Italy collapse the euro?

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  • 27-05-2018 10:33pm
    #1
    Registered Users Posts: 5,803 ✭✭✭


    You may recall that in early March, Italy held an inconclusive general election, in which the populist Five Star Movement and the right-wing Lega (formerly Lega Nord) emerged as the two largest parties. Negotiations to form a government have dragged on since, and in early drafts, proposals to leave the euro and repudiate debt were included in programmes, though these were later dropped.

    Lega and M5 had agreed a neutral candidate for PM, but now the Italian President has vetoed the proposed Cabinet, as the suggested Finance Minister has doubts about the euro. Elections would likely further strengthen both the Lega and M5, so is the euro facing its greatest ever threat, or similar to Greece, will the politicians back off after pushing affairs to the very brink?


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Comments

  • Moderators, Society & Culture Moderators Posts: 12,521 Mod ✭✭✭✭Amirani


    They could yeah, but they won't. Italy can't threaten to default in the same way Greece essentially did, a large proportion of Italian Government debt is domestic, to Italian people and institutions (pensions, savings etc.). A threatened default will see any Government kicked out off office.

    Italy has been desperately trying to continually bail out banks because of this, even though it's now against EU law in most cases. They don't want the political backlash of Italian investors being burned.


  • Registered Users Posts: 23,563 ✭✭✭✭Kermit.de.frog


    The market may decide Italy is a busted flush and lock it out of the debt markets.

    That's the biggest danger and it's very real. Draghi's bond buying plan is not keeping their interest rates down and I think we will see a further surge on the chaos in the coming weeks.


  • Registered Users Posts: 408 ✭✭DubInTheWest


    I wish


  • Registered Users Posts: 23,563 ✭✭✭✭Kermit.de.frog


    Not sure it is something to be wished for.

    The EU/ECB and the IMF can not bail Italy out. The country is only able to borrow due to the ECB's asset purchases of sovereign debt. But this is coming to an end.

    Even if there was no political crisis it seems to me they are headed for the rocks anyway. The contagion will likely go to Spain and Portugal.

    The Eurozone is headed for a far more serious crisis than the last one which never really went away. The ECB papered over the cracks.

    The process is just being sped up.

    What Ireland needs to think about is whether we have built a sufficient firewall through our corrections that can protect us when the market attacks the weak links. Is Ireland core Eurozone or still the PIIGS periphery?

    Personally I think we probably are considered core now and are protected somewhat but you never know.


  • Registered Users Posts: 408 ✭✭DubInTheWest


    The debate will rock on whether someone says the euro should collapse or if it should stay. My personal opinion is let it collapse. England was right to get out and keep the sterling.

    The thing is it won't collapse. The ecb etc.. won't let it. Just look at Greece. It was said it would collapse there and it didn't. They took to the streets and caused chaos. And poor oul Ireland was hit with massive budgets. I read Lenihan was going to let the banks burn, he got a call in his car on the way to the dail from someone in europe and was told there would be war in europe if we didn't bail them out (banks.)

    We got it up the gicker while Mrs Merkel stroked our governments ego, pack of scum.


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  • Registered Users Posts: 23,563 ✭✭✭✭Kermit.de.frog


    Ireland's problems were created in Ireland.

    The EU did not elect our governments.

    Irish people need to take responsibility for their own actions. Why should a German taxpayer bail out Paddy who put themselves in the situation they found themselves? Why would Germany take the consequences of feckless decision making in Ireland? Let the banks go seems simple - until you realise it weakens every bank in the eurozone and puts those countries at risk. That's systemic risk.

    Greece is not Italy. Italy goes down and the eurozone goes with it. If the eurozone goes with it Ireland will suffer a catastrophic outcome and there will be no bailouts this time.

    There should be an orderly exit of countries that are too delinquent economically for the currency (this can't happen because the market anticipates these things) and Italy is at the top of that list. It would have to be quick, an overnight thing to prevent speculation tearing other countries a part. Even then the consequences for countries on the periphery are really bad.


  • Registered Users Posts: 408 ✭✭DubInTheWest


    The Irish people need to take responsibility for their own actions, that's a laugh and ridiculous to say the least. The banks gave the property developers and builders the cash and the rest of the nation has to pay hugely for it.
    Europe/Irish Government wouldn't let the bondholders burn because politicians here in Ireland and all over Europe had major stakes.

    Around that time all the dirty green party wanted to do was ban light bulbs lol and put up the price of petrol and diesel, may they never return. Labour came around the door promising this that and tother and went back on everything, again may they never return.

    If Ireland doesn't jump high for the EU they whip our ass, just google it, lots of reading on independent.ie


  • Registered Users Posts: 23,563 ✭✭✭✭Kermit.de.frog


    Again, Irish governments elected by the Irish people facilitated feckless lending policies.

    I did not see Irish people complain at the time.

    So why should Germany have bailed the Irish out of that at risk to themselves?

    The Irish people, this country, is 100% responsible for the mess it got itself in.

    Everyone knows it except some Irish people because they are too proud or whatever.

    You should be pissed off, not at Europe, but the Irish voters that put in Bertie and the rest of them that ultimately had us going cap in hand to the Brits and everyone else for a bailout.

    That's ours. Take ownership of it and stop bull****ting around it. You fool no one not least those outside the country. Everyone knows what happened in this country.

    If it makes you feel better the Italians will suffer the same fate. Choose corruption and incompetence then take the consequences.


  • Registered Users Posts: 408 ✭✭DubInTheWest


    Ok it was all our fault. I worked nearly 80 hour weeks back then. I never even voted for Bertie at the time. I was made reduntant and ended up with debt. I have myself to blame. Hmmm Ok, Germany is the best country ever.


  • Registered Users Posts: 23,563 ✭✭✭✭Kermit.de.frog


    Ok it was all our fault. I worked nearly 80 hour weeks back then. I never even voted for Bertie at the time. I was made reduntant and ended up with debt. I have myself to blame. Hmmm Ok, Germany is the best country ever.

    I mean the Irish people collectively. Not you personally. A lot of us got caught up in it.

    It pisses me off. But it is IRISH voters that did that to themselves, me, you and all of us.

    The EU did not do that to us. "We" did it to ourselves.

    I'm just sick of the "blame everyone else" bull**** you hear. EVERYONE knows outside of Ireland exactly what happened here.

    Thankfully we are hopefully through it.

    What's important is that it never happens again.


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  • Registered Users Posts: 23,563 ✭✭✭✭Kermit.de.frog


    Italian bonds rallied a little this morning on the failure of the lunatic movement to form a government.

    Unfortunately the market views Italy as something of a lost cause and those gains are being erased quick fast.

    What can Draghi do to stop the bleeding? Nothing. The Bundesbank will not allow him any special arrangements for Italy. The bond buying by the ECB is being tapered, soon ended and won't be reversed.

    The EU won't step in. As they said the market will do the work. They don't have to do anything.


  • Registered Users Posts: 28,944 ✭✭✭✭Wanderer78


    The EU, and in particular the euro is flawed by design, it's obvious that wealth and power are centralising in the euro zone, particularly since the crash, if this doesn't change soon, it may very well collapse. Initiatives such as qe and austerity have failed across the euro zone, and no, individual countries such as ours were not completely at fault for causing our individual crashes, having a common currency with no true surplus recycling mechanism in place, was doomed from conception. Maybe we will see more bail ins this time around for Italy?


  • Registered Users Posts: 33,786 ✭✭✭✭listermint


    Wanderer78 wrote: »
    The EU, and in particular the euro is flawed by design, it's obvious that wealth and power are centralising in the euro zone, particularly since the crash, if this doesn't change soon, it may very well collapse. Initiatives such as qe and austerity have failed across the euro zone, and no, individual countries such as ours were not completely at fault for causing our individual crashes, having a common currency with no true surplus recycling mechanism in place, was doomed from conception. Maybe we will see more bail ins this time around for Italy?

    Doomed to fail.. but we are the fastest growing economy in Europe, perhaps the world ?

    Yes were having it bad here with full motorways because our unemployment is ridiculously low.

    Yes we have housing problems and other things but i dont think the Euro is one of them. Some utter drivel in this thread all the same.


  • Registered Users Posts: 20,397 ✭✭✭✭FreudianSlippers


    The Irish people need to take responsibility for their own actions, that's a laugh and ridiculous to say the least. The banks gave the property developers and builders the cash and the rest of the nation has to pay hugely for it.
    Europe/Irish Government wouldn't let the bondholders burn because politicians here in Ireland and all over Europe had major stakes.

    Around that time all the dirty green party wanted to do was ban light bulbs lol and put up the price of petrol and diesel, may they never return. Labour came around the door promising this that and tother and went back on everything, again may they never return.

    If Ireland doesn't jump high for the EU they whip our ass, just google it, lots of reading on independent.ie

    Ah the typical economic ignorance of wider global economic crisis which significantly contributed to the Irish collapse. Anyone spouting revisionist nonsense that Ireland could have been insulated from the global economic collapse should not be taken seriously in the slightest.


  • Registered Users Posts: 28,944 ✭✭✭✭Wanderer78


    listermint wrote: »
    Doomed to fail.. but we are the fastest growing economy in Europe, perhaps the world ?

    Yes were having it bad here with full motorways because our unemployment is ridiculously low.

    Yes we have housing problems and other things but i dont think the Euro is one of them. Some utter drivel in this thread all the same.

    we re codding ourselves with the metrics and metric systems we use to measure the health of our societies, terms such as gdp and full employment etc. its becoming clearly obvious that the cost of living is in fact rising but wages have become stagnant, or are not rising fast enough to meet this rising cost of living. many newer jobs created are of low pay and have a very precarious nature, jobs such as zero hour contracts etc. our most essential needs are not being met, in ireland this is showing in failing housing policies and deep problems within our health services etc. this is particularly obvious with younger generations, where their future is very uncertain regarding these matters, the euro is failing, but we havent accepted this yet


  • Registered Users Posts: 20,397 ✭✭✭✭FreudianSlippers


    Wanderer78 wrote: »
    we re codding ourselves with the metrics and metric systems we use to measure the health of our societies, terms such as gdp and full employment etc. its becoming clearly obvious that the cost of living is in fact rising but wages have become stagnant, or are not rising fast enough to meet this rising cost of living. many newer jobs created are of low pay and have a very precarious nature, jobs such as zero hour contracts etc. our most essential needs are not being met, in ireland this is showing in failing housing policies and deep problems within our health services etc. this is particularly obvious with younger generations, where their future is very uncertain regarding these matters, the euro is failing, but we havent accepted this yet
    Not linking the leftist handbook's talking points in this post to the last sentence regarding how this results in the Euro failing tbh.


  • Registered Users Posts: 33,786 ✭✭✭✭listermint


    Wanderer78 wrote: »
    we re codding ourselves with the metrics and metric systems we use to measure the health of our societies, terms such as gdp and full employment etc. its becoming clearly obvious that the cost of living is in fact rising but wages have become stagnant, or are not rising fast enough to meet this rising cost of living. many newer jobs created are of low pay and have a very precarious nature, jobs such as zero hour contracts etc. our most essential needs are not being met, in ireland this is showing in failing housing policies and deep problems within our health services etc. this is particularly obvious with younger generations, where their future is very uncertain regarding these matters, the euro is failing, but we havent accepted this yet

    A paragraph of soundbites,

    Where is the evidence of widespread zero hour contracts in this country?

    Is it any wonder you cant get a tradesman for love nor money.

    Why you ask? because everyone is doing up their homes/ gardens/ extensions.. and so forth.

    But yes theres no money in the country and the euro is failing.


    Quality!


  • Registered Users Posts: 28,944 ✭✭✭✭Wanderer78


    listermint wrote: »
    A paragraph of soundbites,

    Where is the evidence of widespread zero hour contracts in this country?

    Is it any wonder you cant get a tradesman for love nor money.

    Why you ask? because everyone is doing up their homes/ gardens/ extensions.. and so forth.

    But yes theres no money in the country and the euro is failing.


    Quality!

    you need a macro head to realise this, crisis such as our one in housing is actually critical, its showing we cannot provide the most essential needs in our society, again all this is evident with younger generations, you will see many of them are stuck at lower paid jobs, many who have been working for some time are stuck in this manner, and probably never will be able to buy their own homes, even well respected analysts such as joe stiglitz speak of such problems. its also important to realise the role of money, i.e. debt, we re actually heavily indebted, causing other analysts such as steve keen to call us a part of the 'walking dead of debt'

    oh maybe theres a shortage of trades people as well! id imagine the younger generations arent chasing trades people, as they dont actually own their own homes, and many simply never will


  • Registered Users Posts: 20,397 ✭✭✭✭FreudianSlippers


    Wanderer78 wrote: »
    you need a macro head to realise this, crisis such as our one in housing is actually critical, its showing we cannot provide the most essential needs in our society, again all this is evident with younger generations, you will see many of them are stuck at lower paid jobs, many who have been working for some time are stuck in this manner, and probably never will be able to buy their own homes, even well respected analysts such as joe stiglitz speak of such problems. its also important to realise the role of money, i.e. debt, we re actually heavily indebted, causing other analysts such as steve keen to call us a part of the 'walking dead of debt'

    oh maybe theres a shortage of trades people as well! id imagine the younger generations arent chasing trades people, as they dont actually own their own homes, and many simply never will
    So your problem is with the modern global economy, fiat currency and capitalism as opposed to the Euro?


    The word "claptrap" springs to mind for some reason...


  • Registered Users Posts: 8,229 ✭✭✭LeinsterDub


    A standoff over Italy’s future in the eurozone has forced the resignation of the populist prime minister-in-waiting, Giuseppe Conte, after the country’s president refused to accept Conte’s controversial choice for finance minister.

    Looks like it's the Italian government that is failing


    https://www.theguardian.com/world/2018/may/27/italys-pm-designate-giuseppe-conte-fails-to-form-populist-government


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  • Closed Accounts Posts: 7,070 ✭✭✭Franz Von Peppercorn


    Ireland's problems were created in Ireland.

    The EU did not elect our governments.

    Irish people need to take responsibility for their own actions. Why should a German taxpayer bail out Paddy who put themselves in the situation they found themselves? Why would Germany take the consequences of feckless decision making in Ireland? Let the banks go seems simple - until you realise it weakens every bank in the eurozone and puts those countries at risk. That's systemic risk.

    Greece is not Italy. Italy goes down and the eurozone goes with it. If the eurozone goes with it Ireland will suffer a catastrophic outcome and there will be no bailouts this time.

    There should be an orderly exit of countries that are too delinquent economically for the currency (this can't happen because the market anticipates these things) and Italy is at the top of that list. It would have to be quick, an overnight thing to prevent speculation tearing other countries a part. Even then the consequences for countries on the periphery are really bad.

    Because for every borrower there is a lender. By bailing out Irish banks those banks continued to pay back loans to German banks or bond holders.


  • Closed Accounts Posts: 7,070 ✭✭✭Franz Von Peppercorn


    So your problem is with the modern global economy, fiat currency and capitalism as opposed to the Euro?


    The word "claptrap" springs to mind for some reason...

    That’s a technical rebuttal.

    The euro is a disaster. Especially for Italy and Mediterranean states in general.


  • Registered Users Posts: 28,944 ✭✭✭✭Wanderer78


    So your problem is with the modern global economy, fiat currency and capitalism as opposed to the Euro?


    The word "claptrap" springs to mind for some reason...

    thanks, very mature debate!:rolleyes:

    theres many well respected economic analysts, some mentioned, that have been talking about this for years, the euro has deep flaws, and we havent addressed them, so some how the euro has nothing to do with the modern global economy, fiat currency and capitalism?:confused:


  • Registered Users Posts: 20,397 ✭✭✭✭FreudianSlippers


    Because for every borrower there is a lender. By bailing out Irish banks those banks continued to pay back loans to German banks or bond holders.
    As opposed to...?


    Serious question.


  • Registered Users Posts: 28,944 ✭✭✭✭Wanderer78


    As opposed to...?


    Serious question.

    its actually a fair question, i think we were in a position of damned if you do, damned if you dont


  • Registered Users Posts: 20,397 ✭✭✭✭FreudianSlippers


    Wanderer78 wrote: »
    thanks, very mature debate!:rolleyes:

    theres many well respected economic analysts, some mentioned, that have been talking about this for years, the euro has deep flaws, and we havent addressed them, so some how the euro has nothing to do with the modern global economy, fiat currency and capitalism?:confused:
    That may well be the case; unfortunately you've failed to raise any of these serious academic points which support your opinion.


  • Closed Accounts Posts: 7,070 ✭✭✭Franz Von Peppercorn


    As opposed to...?


    Serious question.

    As opposed to the EU bailing them out or printing money to buy the bonds which is what they did later anyway under QE.

    Edit :

    By later I don’t mean they bought the Irish bonds. They became sovereign debt. They bought other bonds though.


  • Registered Users Posts: 20,397 ✭✭✭✭FreudianSlippers


    As opposed to the EU bailing them out or printing money to buy the bonds which is what they did later anyway under QE.
    So no difference. Gotcha.


  • Registered Users Posts: 20,397 ✭✭✭✭FreudianSlippers


    BTW Italy was ****ed long before the Euro.


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  • Registered Users Posts: 28,944 ✭✭✭✭Wanderer78


    That may well be the case; unfortunately you've failed to raise any of these serious academic points which support your opinion.

    i struggle to do so via text, but i do follow the work of many well respected economic commentators, some mentioned. the developments in the euro zone have been very worrying, particularly since the crash, i fear we have not addressed the underlining issues that caused it


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