‘For The Sake Of The Children!’ Italy’s Populists Fail To Form Government Setting Stage For God Knows What

Well, it looks like things might be getting ready to go (further) off the rails in Italy.

As you’re undoubtedly aware, the Five Star-League populist coalition has at been at pains to get the ball rolling in earnest on their implicit quest to put the country on the road to fiscal ruin.

On Sunday, that quest looks to have hit a dead end when Mattarella decided maybe octogenarian euroskeptic Paolo Savona wasn’t a great choice for finance minister.

“I agreed to all the ministers except the finance minister,” the President said, in Rome, adding that he “asked for a figure who would mean not risking an exit from the euro.”

That seems reasonable to everyone except folks who want to maybe exit the euro and those folks include some populist factions, their protestations and attempts to obscure that push notwithstanding.

Conte officially through in the towel. He does want you to know that he “did [his] utmost to try to fulfill the task” of  forming a government. Thanks!

If you just go back and read some of the things ol’ Paolo Savona has said, it’s pretty clear why he might have been a dangerous choice for FinMin. Here are some excerpts from a three-year-old interview with Vita magazine:

The well-known economist Paolo Savona, former Minister of Industry in the Ciampi government and author for Rubbettino of the controversial pamphlet “J’accuse”, does not use mince words . The Italian drama of yet another lost opportunity “(pp. 84, these days in bookstores): ” Germany has declared that it has lost the trust in Tsipras’ Greece. This declaration permanently looses confidence in Schäuble’s Germany or, more accurately, confirms that Germany is not a reliable partner in building a united Europe ” .

According to Savona, just Schäuble (and not Merkel), is ultimately responsible for the affair.”My insistence not to give Merkel responsibility for the story is due to the knowledge of the events of the German Christian Democrats who saw Schäuble, the dolphin of the prestigious Chancellor Khol with whom he remained involved in the Party’s financial scandals, surpassed by Merkel. He was the protagonist of German reunification and, in the course of this historic operation, Schäuble was the object of a vile attack that deprived him of the use of his legs by forcing him on a wheelchair. He therefore added to his personal ambition the right to a fee, that of being appointed Chancellor; the Greek crisis is the opportunity offered to ride 70% of the Germans who are against Greece and are in favor of managing the euro differently from the Deutsche Mark.I have already warned that this is one of the cornerstones of the Funk Plan, Minister of the Nazi economy, which aroused the concerns of the Italian Ambassador in Berlin who warned Mussolini of the risks inherent in the project. But the main point of the Plan is the self proclamation of Germany as “the country of order of Europe”. The Greek crisis – and above all the result of the referendum that has revealed the allergy of a people to democracy “of others” – was an excellent opportunity to confirm this point. The others are warned and among these there is obviously Italy of which it is known that the Germans do not trust their past experiences. The accounts must therefore be equalized and it is up to the healthy part of the Germans to tell us that this is not the case. I have lost faith in them ».

Plan B
“If Italy has not already done so, it is time to have a Plan B ready – at the end of the euro or exit from it – which I insistently requested to prepare from May 12, 2011. Agreements constructed poorly or signed by countries with hegemonic intentions have no long life. If we were caught unprepared for the event, it would really be a drama.

Clearly, some things are lost in translation there (literally – that’s a Google translation), but I think you get the point.

Now, Italy faces the prospect of new elections and also the prospect that the populists are going to try and impeach Mattarella.

I guess there are a couple of ways you could look at this, one of which is to suggest that maybe new elections would be less bad than an outright populist government hell-bent on implementing some of the measures that rattled markets last week. But I’m not sure what Europe needs right now amid a deceleration in economic activity and renewed jitters about Spain is a prolonged period of acute uncertainty in Italy.

Spreads to bunds have of course exploded wider and now Spain is in the “triple-digit club”:

SpreadsToBunds

Meanwhile, Italian equities are teetering on the verge of correction:

FTSEMIB

While CDS is blowing out:

ItalyCDS

And the ISDA basis (i.e., “redenomination risk”) has moved sharply wider as well:

ISDASwitch

Unfortunately, the best way to sum up this rather fluid situation right now is to simply employ a Trumpism and say: “we’ll see what happens.”

Oh, and Salvini is of course furious and is on Facebook talking about conspiracies and emancipating Italy from German “slavery” – you know, “for the sake of the children”…

Italians first, their right to work, safety and happiness. We worked for weeks, day and night, to give birth to a government that defends the interests of Italian citizens. But someone (under pressure from whom?) Told us NO. No more servants of anybody, Italy is not a colony, we are not slaves of Germans or French, of the spread or of finance. At this point, with honesty, consistency and the courage of all time, the word must return to you! #Primagliitaliani! I do not give up, for the sake of our children.

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