The latest moves by leader of The League, Matteo Salvini, confirm for me that he is the real deal.
By nominating another hard-ass Euroskeptic as Finance Minister, Giovanni Tria, Salvini proves he’s not some feckless (the word of the day apparently) swamp-dweller. Rather, he’s a smooth and dangerous political opponent for the powers-that-be in Brussels.
Over the past two days the headlines and the markets have tried to gaslight us into believing the coalition between the two populist parties in Italy — The League and Five Star Movement — was fracturing after President Sergio Mattarella’s rejection of their proposed government.
Stories of dissonance about when to hold new elections; withdrawing Paolo Savona’s nomination as Finance Minister (Mattarella’s nominal reason for rejecting the coalition); and even whispers that Salvini would ditch Five Star abounded.
And with it Italian bond yields plunged, the euro rallied and markets tried to stabilize.
There’s only one problem with all of that.
Not a word of it was true.
Salvini is looking at the situation smartly. By submitting a new cabinet he’s telling the Italian people that he and M5S leader Luigi Di Maio are working hard to form a government to serve their needs and address their major concerns.
This is smart politics. Put the ball back into Mattarella’s court. Show the people that he’s the problem. Turn them against him and Brussels even more than before. Make it easy for even the caretaker government to impeach him.
In other words, it’s smart to let the people guide your decisions by helping stoke their anger over not being heard.
He can take the lead on this because The League’s popularity is rising in the polls while M5S’s holds serve or falls back a bit, depending on which poll you look at. There’s no question at this point that The League is rapidly emerging as the driver of this tank bearing down on Brussels.
So it is imperative that Salvini not only look like a competent leader but also make the right moves to put Brussels on its back foot.
And it looks like Salvini’s got his main gun locked and loaded for war. Because, he knows, after watching Greece in 2015, that war is what is coming. Because these people will not give an inch regardless of how it looks.
Both sides are seeing this through the lens of an existential crisis, for Italy and the EU. A
I was worried about Salvini earlier in the process, feeling he could jump in any number of directions. I certainly wanted to believe he was the real deal, but you never know with any politician until things start getting tough.
It’s obvious with this move to nominate Tria that he’s not ready to give Mattarella an inch. He knows time is on his side. Because if Mattarella forces another election, which Salvini wants to put off until September, then he knows he’ll have another three months to become the senior partner in any coalition with M5S, possibly to become Prime Minister.
But, also, secondarily, it’ll give him more time to negotiate with U.S. president Donald Trump to game-plan how to put the screws even harder to Germany. As I talked about the other day, Trump wants the EU sanctions on Russia to stay in place, Italy could end them in July.
So, there’s the basis for a deal here between Salvini and Trump. If Mattarella folds, then Italy could vote with the sanctions in July in exchange for tariff exemptions/debt assistance from Trump.
The other side of this is what I laid out last week, that Merkel allow Italy to take the EU out of the U.S. sanctions regime and declare open war now that Trump has put punitive tariffs in place. That’s her deal.
And in the middle Salvini can get both to fight over Italy to get what he needs, a way out of the nightmare that is the euro-zone.
Salvini is setting Italy up for an incredible showdown with the EU. He knows he holds the right cards. He just has to firmly convince the people it’s time to play them all.
That’s all well and good, but as a practical matter how does a country restore it’s sovereignty after the Euro hook has been set? By now the entire legal and banking infrastructure to support an independent currency has been dismantled. Intentionally so, from Brussels’ perspective. How long can an economy hold it’s breathe without a currency? Not as long as it takes to jump start a new one I’d wager. I assume the little 2% blip in Italian rates was just the ECB tugging on the line to show everyone who runs the show. Without ECB support Italian bonds, the bid goes to zero.
As in chess, I assume the winner is the one who can plan ahead the most moves. Lowly me can’t see the whole board, but I have to assume the insiders can. Tell me this isn’t the simple game of chicken this appears to be on the surface, because I don’t see how this the crash can be averted anymore.
The crash can’t be averted. And I think Salvini knows this as much as the EU does.
The mini-BOT idea is the practical, pain-light way for Italy to go forward. So is simply unilaterally pulling out of the currency and declaring its sovereign debt payable in new lira. its been done before and it can happen again.
If you think the scare on Italian bonds was a warning go look at what’s up with Deutsche Bank. That’s an outgrowth of this and the FED hikinig rates and the USD rising. In a few weeks Italy will be the least of Merkel’s troubles.
Yeah, DB is toast. Bought some long puts on them a while back. It might take Brexit to do them in though. The drowning do struggle until the end. Calling Elon Musk…
And he’s not picking up the phone, too busy trying to figure out how he’s going to afford food once this is over.
Reblogged this on Today,s Thought.
The game’s afoot with the coalition’s successful formation of a government.
Their leaders’ courage to take serious risks for principles based on national sovereignty is what
distinguishes them from the usual trough feeders, i.e., former IMF staffers and Goldman Sachs alumni.
The door to a new alignment globally has been cracked open, what with this Italian imbroglio, the German desire for Russian Nord Steam 2 gas, the new US tariffs on the EU in re aluminum and steel, the US abandonment of the Iranian nuclear agreement and the realpolitik of the N. Koreans. One needn’t enthusiastically support any of the various players to see that the present order is gaining downhill momentum.
We all know you can’t win a nuclear war. Everyone gets destroyed. This crisis has all the ingredients of a nuclear war. Italian debt, industrial decline, mass employment, migration crisis and bad banks vs threatening to leave (and destroy) the euro. It’s only a threat in the short run, for the euro is doomed. In the coming years this whole European house of cards will come crashing down. Who will get most of the blame? The bets are on…