The nations of southern Europe—France, Spain, Italy, as well as Greece—are all facing political instability as the financial crisis grinds on, especially in the banking sector, a veteran City of London analyst told EIR on Friday. European banks overall are much more exposed than are U.S. banks to the emerging market turmoil of the past weeks, on top of their own internal problems.
In France, where the banks are in the worst shape in all of Europe, the Hollande government itself sums up its political problems. French banks have especially large exposure to Southeastern Europe, Turkey, and Asia, the analyst said. While some may welcome a new Matteo Renzi government in Italy, Renzi’s government would be based on an agreement with ousted Silvio Berlusconi, and it is unlikely it has any longer-term potential, which will leave Italy in even worse chaos. Italian banks are exposed in North Africa and Russia. Spain is mostly exposed to Latin America—ironically, likely in better shape than Spain itself. Scandals are also hitting there, including the Spanish Royal Family’s direct involvement in a big corruption scandal.
Letta Resigns; Renzi ‘The Demolisher’ To Be Appointed Premier
Italian Prime Minister Enrico Letta resigned yesterday, after his party steering committee voted 136 to 16 (two abstained) for a Premiership change.
The City of London had since long signaled they want the young Democratic Party Secretary General and Florence Mayor Matteo Renzi, to replace Letta. Renzi will receive the mandate from President Giorgio Napolitano after a short round of consultations. Renzi will lead a government with the same majority formed by the DP and the center-right party, to start with. There will be a reshuffling though, with U-40 personnel. Lucrezia Reichlin, who just refused an offer to become deputy chairman of the Bank of England, is rumored to replace banker Saccomanni as Economy Minister.
British puppet Renzi is seen as enjoying more popular support than British puppet Letta, although their economic programs scarcely differ. Renzi, however, would probably not have traveled to the Sochi Olympic Games, where Letta—one of very few European heads of government to do so—went and met with Russian President Putin.
In typical fascist manner, Renzi is known as “the Demolisher” (Il Rottamatore) as he started his national political career calling for “demolishing” older politicians and replace them with younger ones.
Things are not much better elsewhere. Mark Carney is continuing the Bank of England’s zero interest rate policy as a blatant political move. Carey was hired at a salary three times that which former BoE governor Mervyn King got, and it was undoubtedly spelled out in his job interview what he has to do to earn it: he has announced that interest rates will be kept low, no longer due to high unemployment, but linked to 18 other “variables.” In fact, Carney said that rates will remain essentially non-existent until May 2015—one month after Britain’s next national elections.
Things are tense also in Central Europe. Already German Chancellor Angela Merkel’s Grand Coalition, just formed in December after prolonged negotiations, is being weakened by the resignation of Agriculture Minister Hans-Peter Friedrich due to a potentially nasty scandal involving Social Democratic Party member Sebastian Edathy. And Austria is facing a potential banking “doom loop” due to the government’s efforts to create a bad bank from the toxic assets of nationalized Hypo Alpe Adria bank, which is causing a big drain on the government’s limited financial resources.
In short, while much attention has been focused on the crisis in the emerging markets, the real doomsday situation is playing out right in the heart of Europe—and on a very fast track.
Strike and Demontrastions in Cyprus and Greece
With the Cyprus and Greek economies in free fall and under the boot of “memorandums” from the Troika, strike and protests are spreading.
In Cyprus, the three largest semi-government organizations (SGOs), the Cyprus Telecommunications Authority, the Electricity Authority of Cyprus, and the Cyprus Ports Authority, began strikes protesting against a government bill which calls for the privatization of profitable SGOs.
The bill, titled “Privatizations Law 2014,” is considered as a precondition for the disbursement of the next tranche of the EU10 billion of the so-called bailout and will be discussed in the next Eurogroup meeting of Eurozone finance ministers scheduled for March 10.
In Greece, following the failure of a meeting with Finance Minister Yannis Stournaras, Greek farmers will decide on whether they will continue their protest action against increased taxes and other measures. The farmers unions will hold general assemblies at the roadblocks which they have set up across the national highways, in order to decide upon their next actions.
Stournaras, the only Greek cabinet minister who is an elected official, is one of the most fanatic pro-bailout members of the government. There seems to be good reason for his passion to save the banks, as EIR recently found out: He is a card-carrying member of the green genocidal Hellenic Chapter of the Club of Rome.
The Athens government has reported “progress” in the economy—it did not collapse as much as was forecast. Instead of collapsing another 4%, it “only” collapsed 3.7%! Greece’s economy has collapsed by more than 25% since 2008, and the new “forecast” that it is supposed to drop by 0.6% this year according to Reuters, but no one believes it, like no one believes, including the Troika, that the government has achieved a “primary surplus,” as the government has been boasting.
Meanwhile, the government announced the indefinite suspension of EU6 billion worth of rail projects that had already been approved. This means several projects which would have integrated important outlying regions with the main north-south Athens-Thessaloniki axis have been all but cancelled.
Glass-Steagall Motion Introduced in Treviso, Italy
Marco Conte, a member of the Treviso city council, introduced a Glass-Steagall motion yesterday. The motion is similar to the one already voted by the Veneto Regional Council, initiated by Conte’s party, Lega Nord, which runs the regional government but in Treviso is in the opposition.
Treviso is a town of 82,000 north of Venice and a center of small and medium-sized enterprises (SMEs), some of them internationally famous, such as Benetton, struck by the industrial desertification brought about by the EU austerity policy.
Today, a new suicide of an SME industrialist was reported in the region. Giorgio Zanardi, 74, hanged himself in his firm in Padua, a small publishing house providing high-quality books for larger houses, leaving a note reading, “there is no future.” The firm had been in trouble, but the crisis precipitated when, last November, the banks shut down a EU2 million credit line, in compliance with Basel III rules.