Debt Crisis Dead-Ahead: Italy's Results Are Truly Forza Italia! | Zero Hedge
Description: "So far, there has been no knee-jerk reaction but that can and will change if Salvini and Five Star head Luigi Di Maio put their heads together and form a workable coalition..."

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Or, why I can't remember the last time I saw the OSCARs and switched channels...

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# Debt Crisis Dead-Ahead: Italy's Results Are Truly Forza Italia!

Authored by Tom Luongo,

Europe is headed for a breakup. But, after a year of watching the EU establishment work the polls just enough to maintain the status quo in the Netherlands, France and Germany I wasn’t expecting much from yesterday’s Italian elections.

But with turnout over 73% we got just that. Voters were clearly motivated to change the course Italy is on. Now, we knew that Silvio Berlusconi’s center-right coalition would do well alongside upstart Five Star Movement.

The question was always going to be, however, how well would they do?

It looks like it was much better than the polls wanted us to believe. Last week I told you the markets were getting nervous about this election. This weekend the news was all about how subdued the reaction was to the polling.

As if a major technical breakout to the upside on Italian bond yields in the face of furious ECB buying wasn’t a strong enough market response?

But, that’s doesn’t fit the plan to gaslight voters and traders to worry about the potential outcome here.

## The League of 5-Star Gentlemen

It looks like Five Star Movement will take more than 30% of the final tally, which is a couple of points above where polling had it tracking when the blackout went into effect two weeks ago.

The bigger result is that of The League (formerly The Northern League) who came off their secessionist mountain and ran hard on a platform of euroskepticism and anti-immigration.

The most important person in Italian politics right now is The League’s leader, Matteo “The EU can go F&%k itself” Salvini.

When the final votes are revealed, if The League out-polled Silvio “Establishment Stalking Horse” Berlusconi’s Forza Italia! then he has the hammer in coalition negotiations.

This is exactly the situation I was hoping for in this election. Because this paves the way for Salvini to pull out of the weak coalition with Berlusconi and form a stronger government with Five Star.

And at that point the price of Tums in Germany rises sharply on new demand. Because the ‘agita’ over Italy’s untenable banking and debt situation will be enormous.

But, if you want to know what the real issue is just look at this map of Italian unemployment.

1% GDP growth is not something to cheer about when you have this kind of capital destruction for half of a country. And with the euro above $1.20, just like Germany wants it, this is only making it harder for Italy to compete in world markets.

In other words, German strong-euro policy is creating the very election results now creating agita in Berlin.

## Forza Populism!

Politicians are stupid.

They don’t know anything about currency, capital flow or substitution effects… except when it feathers their nests. But, when a policy is inconvenient to them they invariably blame ‘the market’ which is another way of saying ‘blaming the people.’

When the people rise up and vote to end their clown show they cry “Fascism!” or “Populism!”

But this trend is in place all around Europe and it won’t end here. Next month Hungary goes to the polls. It’s leader Viktor Orban and his Fidesz party have the opportunity to grab a super-majority with coalition members and begin altering the Hungarian constitution to the desires of Hungarians, not the EU.

Italy just gave Hungary a big boost of adrenaline to do just that. It also gave Poland an assist in resisting Angela Merkel’s crusade to crush Polish sovereignty for the second time by Germany in under a century.

There comes a point where lying to your people doesn’t work anymore. They can see with their own eyes what’s happening and no amount of gaslighting via polls, economic statistics or Alinsky-style shame tactics works anymore.

That’s what’s happening in Italy. And that’s the beginning of the end of the European Project.

## Debt Crisis! Dead Ahead!

Right now the market has been lulled into a false sense of security by the ECB’s manipulation of bond yields via its asset purchasing program, i.e. QE. Five year Italian Credit Default Swap spreads are at a 6-month low thanks to a lack of concern about these election results.

So far, there has been no knee-jerk reaction but that can and will change if Salvini and Five Star head Luigi Di Maio put their heads together and form a workable coalition.

Because Italy’s banking system is more functionally insolvent than everyone else’s (by orders of magnitude) there will be a push by the market to resolve this situation.

For months I’ve been warning you that that all we needed was a trigger to end this counter-trend rally in the euro and firm up the U.S. dollar.

We’ve seen the rush into the euro while bond yields began rising a few months ago. This is an investor class moving to cash pre-positioning for a chaotic market. We’ll see a bit more of this while these results are digested and there is still hope for a Grand Coalition deal between Berlusconi’s center-right coalition and the failing Democrats.

But, more likely is what I just laid out above. So, the next step will be the wholesale pulling out of assets from Europe once Salvini rejects a deal from Berlusconi and he and Di Maio form a government.

And once that occurs, CDS rates will rise, bond yields (already under pressure from a tightening Fed) will rise as well and the next wave of the cycle can begin.

Salvini knows the euro is the main source of Italy’s pain. He’s said as much. Now here’s the opportunity to heal Italy as a country and bring the North, where The League is strong, and the South, where Five Star is strong, together for an Italy which stands up to the depredations of a voracious EU bureaucracy.

As I’ve pointed out multiple times, the German people have no desire to bail out Italy. They wouldn’t bail out Greece, a much smaller problem. They just voted for no bail-outs and are marching in the streets against more strain on their social fabric via Merkel’s immigration policy.

So, the only path forward in Italy’s best interest is Salvini and Di Maio coming together and selling a showdown with Germany over the euro and debt relief. Once they move forward with reforms both Brussels and the IMF will not back the true face of the EU will be shown and I expect an already angry Italy will shift very quickly towards Italeave just like what happened in the U.K. with Brexit.

* * *

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## Comments

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EuroPox Tue, 03/06/2018 - 03:36 Permalink

The Euro cannot survive... will Italy pull the plug or will the Eurocrats threaten Silvani's life (just like they did to Tsipras - which was why he did not follow up on his pre-election promises and why Varoufakis had to go)?

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knarkworst EuroPox Tue, 03/06/2018 - 03:43 Permalink

Nobody will pull the plug until the next debt crisis. The corrupt establishment in the EP has (still) to much control.

In reply to The Euro cannot survive… by EuroPox

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Haus-Targaryen knarkworst Tue, 03/06/2018 - 03:58 Permalink

While I agree with the author's analysis -- I disagree with his conclusion.

As with Tsipras and the Greeks ca. H1 2015, and Juncker's "There can be no democratic decision against the European Treaties" ... the path forward is very clear.

Let's say for a second that M5S and LN form a government with the goal of nuking the euro from deep space -- like the Greeks there will be scrambling, perhaps the ECB will use bank liquidity as a weapon to bring the population to its knees -- perhaps there will even be another referendum in Italy.

At the end of the day, something somehow will be communicated to the Italian "head of state" behind closed doors and he will magically change his position on the EU and the euro, exactly like Tsipras did.

I imagine there is a conversation where each "head of state" learns they aren't actually a head of state, and are more or less just a caretaker. At this point said "head of state" will throw his own people under the bus and the EU has successfully extinguished a potential fire for another few years until a more "friendly" government can get "elected".

This keeps working until one of two things happen:

a) Some external shock wipes the euro (and the EU by extension) off the planet which is beyond the control of politicians here; or

b) Some systemically relevant EU nation experiences a "Red October" kind of revolution where politicians are handing from highway overpasses and the "wealthy" are fleeing for their lives.

Sorry to bust your bubble, but there is no "democratic decision against the European Treaties" ... Juncker is right. I think what he meant to say was "While there can be decisions agains the European Treaties, they will be simply ignored or discarded until the will of the people can no longer be ignored and end up hanging their own 'governments'."

In reply to Nobody will pull the plug… by knarkworst

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World Cash Day Haus-Targaryen Tue, 03/06/2018 - 04:17 Permalink

The date is a year off.

Combattimento 23 marzo 2019.

Trust me - that centenary has great significance in Italy.

Forza Amilcare!!

In reply to While I agree with the… by Haus-Targaryen

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purplewarrior World Cash Day Tue, 03/06/2018 - 04:34 Permalink

I'm tired of hearing about this debt crisis and that debt crisis. None of it fucking matters until interest rates get raised. And they won't get raised without significant inflation. You got to give them credit. These banksters can hold this shit together.

In reply to The date is a year off… by World Cash Day

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Pandelis World Cash Day Tue, 03/06/2018 - 04:44 Permalink

the day sounds about right (if there is some significance to the day the more to it - ((they)) seem to follow these dates for some reason). 24 is a sunday and on 26 comes the chinese attack on petroduleur

In reply to The date is a year off… by World Cash Day

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Déjà view Pandelis Tue, 03/06/2018 - 05:38 Permalink

Italeave...Süd Tiroleave...Servus!

In reply to the day sounds about right … by Pandelis

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eforce Déjà view Tue, 03/06/2018 - 05:41 Permalink

There is honor amount theives (socialists) so if elected don't expect any radical change (like in Greece).

In reply to Italeave...Süd Tiroleave… by Déjà view

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Pandelis Haus-Targaryen Tue, 03/06/2018 - 04:42 Permalink

@haus targereun

This is all well planned and whatever has beed decided will happened no doubts about it.

Italy as the breaker does not sound too bad of an idea if someone was planning it. The breaking of Euro has been planned since its inception (there is one currency but each country issues its own bonds; like michigan issuing its own bonds, it does not work because "mr market" will short the bonds of that country and it is the same as shorting the currency).

It seems about the right time also (one clue is that economist from 30 years ago, another clue the north korea thing and so on). There are just too many things going on right now and one can feel that armagedon up in the air.

On Tsipras who knows what the story is, but has emerged in the parliament (now that there are all these coming wars for PIPELINES ... oppsss sorry POTENTIAL sea oil reserves (the largest ever to POTENTIALLY be discovered)... cyprus will get dragged into again) that he visited rothchild bank in paris (no explanation given as to why) ... so better write him off.

brexit also will materialize so uk goes down the drain, and once that march 2019 is up Scotland will declare independence.

thanks to soros at al efforts (with their fifth column inside) we got a full stream of unstoppable people coming from everywhere who deserve everything because ... yeah well dont worry will explain it to you later.

so, italy sounds about right given the time (and the exposure - all well planned, i think is one of the PIGS ... lol) ... the author seems to know his stuff there.

In reply to While I agree with the… by Haus-Targaryen

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philip88 Haus-Targaryen Tue, 03/06/2018 - 05:39 Permalink

I agree 100% with what you wrote...

The EU cannot collapse, it is key to the globalist plan. They can go as far physically kill the Italian politicians who will not follow the blue print!😱

In reply to While I agree with the… by Haus-Targaryen

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doctor10 Haus-Targaryen Tue, 03/06/2018 - 05:41 Permalink

The Euro is a worthless currency. Those suborned to it will never make enough with it and from it to pay off any debt with it whatsoever.

Any Italian Lira, or for that matter, Greek Drachma, has more potential to serve the bankers than the Euro. Bankers are usually smarter than this-but they got suckered by the NWO delusion and the illusions of productivity of a forced migrant growth population.

In reply to While I agree with the… by Haus-Targaryen

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Der Libertäre Haus-Targaryen Tue, 03/06/2018 - 05:45 Permalink

I waited for this election like a 4year old for Christmas. I expect a first step to the exitdoor by saying "we need the Lira back as a 2nd currency to be able to devalue". This will quickly be copied by others until their sytems run in national currencies again and the Euro will be only an appendix for nothing but debt papers.

The last big idiot with a whole bunch of Euro debt papers and Euros - all totally worthless by then - will be Merkellandia. The Germans will pay the debt of all as they have a collective historic guilt anyway. And I do not expect a thank you but a "hate you" from the world (Poland is first these days to install hatred against Germany again).

We have had 8 years of Potemkin now.

How did you go bankrupt? First slowly then suddenly!

First 2nd currencies everywhere and when Germany is bankrupt (remember "sick man of Europe") all others will leave quickly.

If nations do not free themselves from the Euro system, they will break into pieces. The Germans say: The shirt is closer than the jacket. Junker is a nobody. Merkel is "the man" (of Soros) - the next guilt cycle for Germany installed.

If Germans (persons not country) want to survive, they must get out before they are closed up in. I argued since 2010 "What, if we wake up in East Germany one day?" I was laughed at.

I honestly wonder, what all has happened - what MADNESS came over us - without that anything reactive happened.

Time seems to be up.

In reply to While I agree with the… by Haus-Targaryen

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HardAssets Haus-Targaryen Tue, 03/06/2018 - 06:14 Permalink

I think you're right.

It would probably take an extremely smart & tough leader with military & intelligence ties to break the grip of the banksters. Putin has the necessary qualities and purged the Western backed oligarchs. There doesn't seem to be anyone like that in Europe or the U.S.

In reply to While I agree with the… by Haus-Targaryen

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firefightergr Haus-Targaryen Tue, 03/06/2018 - 07:01 Permalink

That's right,there is no democracy in the EU,just a euronazi regime.

In reply to While I agree with the… by Haus-Targaryen

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spag EuroPox Tue, 03/06/2018 - 03:51 Permalink

italy is a shithole, it was a shithole before the euro. its a shithoke with the euro and will continue to be a shithole after leaving the euro zone.

In reply to The Euro cannot survive… by EuroPox

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Fireman spag Tue, 03/06/2018 - 04:14 Permalink

Never got to go there obvioUSly. Poor bastud stuck in Slumville!

In reply to italy is a shithole, it was… by spag

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Idaho potato head spag Tue, 03/06/2018 - 05:13 Permalink

The well traveled sophusticated American speaks!

In reply to italy is a shithole, it was… by spag

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Etteguj Guj spag Tue, 03/06/2018 - 06:43 Permalink

Lemme guess - you live in Baltimore and you're angry?

In reply to italy is a shithole, it was… by spag

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Jo A-S EuroPox Tue, 03/06/2018 - 04:13 Permalink

Spot on re Tsipras. He bottled it. He had the vote to leave he Euro. A large referendum vote to leave. If Greece had declared bankruptcy, they'd be on the road to recovery. At the moment, Greece's tax income balances out outgoings. BUT, she can NEVER repay the debt owed. And the EU/Germany knows it........ Hence, Greece is, in effect, continuously grovelling to them.......

In reply to The Euro cannot survive… by EuroPox

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Algo Rhythm EuroPox Tue, 03/06/2018 - 04:17 Permalink

Tick...tick....tick....boom and another world war kicks off.

In reply to The Euro cannot survive… by EuroPox

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I hate cunton EuroPox Tue, 03/06/2018 - 04:52 Permalink

Fool me once... I'll belives it when I sees it.

In reply to The Euro cannot survive… by EuroPox

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zenon EuroPox Tue, 03/06/2018 - 05:38 Permalink

Do you know something (re. threats to Tsipras) or are you making educated guesses?

In reply to The Euro cannot survive… by EuroPox

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EuroPox zenon Tue, 03/06/2018 - 05:50 Permalink

I am not guessing but neither am I the original source.

In reply to Do you know something or are… by zenon

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gregga777 EuroPox Tue, 03/06/2018 - 06:56 Permalink

1) Owe a bank $100,000 and it's your problem.

2) Owe a bank $100 million and it's the bank's problem.

Italy owes the Deutsche Fourth Reich somewhere around €800 billion in TARGET2 funds. That definitely fits the second of the above situations. Italy's TARGET2 debt is very definitely a big problem for Deutschland.

In reply to The Euro cannot survive… by EuroPox

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buzzsaw99 Tue, 03/06/2018 - 03:52 Permalink

leave or don't leave, bailout or no bailout, italy will never be able to pay that money back.

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Caciqué buzzsaw99 Tue, 03/06/2018 - 04:27 Permalink

Who will?

Even Germany has a super-massive debt to carry. And as soon as more taxes had been collected than spent the German politicians came up with more plans to spend the surplus instead of giving back the money or repay the debts.

In reply to leave or don't leave,… by buzzsaw99

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DaiRR buzzsaw99 Tue, 03/06/2018 - 05:13 Permalink

The Italians love a party. Heck, back in the '60s an Italian family down the road had their first member ever graduate from high school, and their party went on for FIVE DAYS.

So it would be awesome if Italy told the EU to shove it and declared a DEBT JUBILEE. Can you imagine how the Italians would party down with that move? I want to be there.

Greece should grow some balls and do the same thing at the same time. Italy-Greece, kind of a special Club Med bond there. Then they should both drive their bad immigrant hordes to seaports, march them onto tramp steamers, which will then deposit them on the shores they originally launched to Italy from, from Turkey to Morocco. Time to start liberating W. Europe countries.

Bring back the Lira ! Tell the EU and the UN to shove it. Tell the Argentinian papa to shove it too. Take your country back now or lose it forever.

In reply to leave or don't leave,… by buzzsaw99

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philip88 DaiRR Tue, 03/06/2018 - 05:48 Permalink

If a politician try to do that him and his family will be killed.

You can play democracy but only if you play according to the script!😂

In reply to The Italians love a party. … by DaiRR

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philip88 buzzsaw99 Tue, 03/06/2018 - 05:42 Permalink

Pay back is not the point.

The point is that everyone must do as if all is fine.as long as possible!

In reply to leave or don't leave,… by buzzsaw99

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JohnGaltUk buzzsaw99 Tue, 03/06/2018 - 05:49 Permalink

Plus what they owe Germany through TARGET 2

In reply to leave or don't leave,… by buzzsaw99

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gregga777 buzzsaw99 Tue, 03/06/2018 - 06:59 Permalink

Since Italy owes it to Germany why ever would they want to pay it back? Italy should just leave the Euro and tell Germany tough shit about that ~€800 billion in TARGET2 balance owed. Not to mention whatever else they purportedly "owe" the ECB.

In reply to leave or don't leave,… by buzzsaw99

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coaltar Tue, 03/06/2018 - 04:04 Permalink

Seems rather manufactured dunno why you'd conclude otherwise, but yeah sure 2018 is just going to be another big old coincidence I guess, eh?

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Kaeako Tue, 03/06/2018 - 04:06 Permalink

"Salvini to pull out of the weak coalition with Berlusconi and form a stronger government with Five Star."

Not going to happen. 5 Star is closer to Syriza, while The League drifts towards the AfD types. Most likely result of the election is no result, they'll get nothing done. As is usual in Italy.

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TrumanShow Tue, 03/06/2018 - 04:26 Permalink

It all looks very promising...until it isn't. Every European election has followed the same path. The voters swinging to the fringe parties who promise a break from the EU but somehow, inexplicably they all just fall short. A coalition that manages to keep the incumbents hanging on by a thread is pulled out of the ashes and the party continues. It will be the same here. Even if they have to go in with a 'radical' party they will all of a sudden not be so radical and will all start wearing Armani suits and Rolexes.

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philip88 TrumanShow Tue, 03/06/2018 - 05:44 Permalink

I agree.

At the end of the day, nothing will happens

In reply to It all looks very promising… by TrumanShow

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Fremover Tue, 03/06/2018 - 04:30 Permalink

Nothing will ever change, if the Italians have a say. A more disorganized population you can hardly find. May be except for the Irish or the Scots, or the French or the Spaniards, og the Greek, or...

Even if one of the parties would gain 75 % majority, they would still have to cope with a minority government, since they just can't agree on anything. Even 100 % majority with only one party in charge, nothing would change. They don't want change.

It just them being what they know best, Italian.

It will only change when it is forced upon them from outside. So, just relax. Nothing will happen. Nothing.

Oh, the Russians... Or the Chinese... Or the Americans... Or Brussels...

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DoolieDoink Tue, 03/06/2018 - 05:09 Permalink

Its not Italeave, but its named after Pizza, so its Pizz-Off

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Fundies DoolieDoink Tue, 03/06/2018 - 05:47 Permalink

Awaygo Dago.

In reply to Its not Italeave, but its… by DoolieDoink

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Fundies Tue, 03/06/2018 - 05:46 Permalink

It's time for another Black Swan.

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