After Brexit, Italy became the epicenter of the new market shivers.
Italy is the third largest EU economy and the eight in world.
It has been one of the biggest casualties of the Eurozone, as it entered in much better shape than the rest of the PIIG. It exchanged the lira with the Euro in 1999 as one of the best European economies and virtually had no growth since as the Euro/Lira conversion was set up to kill the economic advantage of Italy versus Germany (practically the conversion was 1:1 with the Deutsche Mark – which was never been achieved in the real market).
Youth unemployment skyrocketed at 39%, Italy debt is 130% of GDP.
Italy in a sense of the limitation of Europe – it needs substantially different economy policies that are not suitable for country like Germany.
Now the heat is on because the market is focusing on the non banking performing loans (approximately 40% of the total loans are not performing, with real valuation at 20% – instead the normal nominal vale of 40%).
But now there are two interesting developments.
As Germany attacked the Italian banking system, PM Renzi, on Reuters, attacked the Germans and in particular Deutsche bank that in a report of the IMF is considered a systemic risk (like Lehman Brothers) as it has an interconnection of trillion of derivatives (Europe GDP Euro 9.6 Trillion, Deutsche Bank derivative book Euro 54.7)
Deutsche Bank is the best secret kept from the media at large. It almost ran aground in March and nobody really knows if it is solvent or not.
So now the solution would be a Government Italian bank rescue. But Merkel does not want to let it happen and – even if it happens it will bring a quite a popular backlash (the economy goes down and the banks get saved again).
And in October we have a referendum (on which Renzi staked his career – a bit like Cameron with Brexit) in order to give more power and stability to the Government.
If it fails, Italy will probably go to early election and – as the latest election shows – MI5 party could win and already promised to call for an ITAXIT referendum.
Meanwhile in September there will be a rerun of the Austrian election (which already said that if Turkey becomes part of the EU they will call an AUXIT) and a (different referendum in Hungary).
The end of Project Europe is started and the end of the 3rd German Conquest of Europe (after 1 and 2 world war). And again The Battle for Britain changed the tide for the German Imperialistic design (by economic force this time).
There will be harsh times ahead, for a better future.
Long live the Queen.
investorpolitico 