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Thursday, June 21, 2012 9:53 AM


Monti Begs Germany to Stabilize Interest Rates; Merkel Pours Cold Water On "Theoretical Discussions"; Italy Official Denial #1; Why Monti's Days Are Numbered


The G-20 summit is over. As expected, the two-day summit produced nothing but bickering.

On day one, European Commission president Jose Barroso kicked things off by sniping at a Canadian reporter and blaming the US for Europe's problems.

UK Independent Party (UKIP) leader Nigel Farage responded by calling Barroso a "delusional idiot".

For a highly entertaining video of Farage's tongue lashing, check out Nigel Farage: "EC president Jose Barroso is a Delusional Idiot, The Whole Thing's a Giant Ponzi Scheme!"

Merkel Ambushed

On day two, French president François Hollande and Italian technocrat prime minister Mario Monti combined to Ambush German Chancellor Angela Merkel

Angela Merkel, German chancellor, is well accustomed to turning up at international events to receive lectures on how to solve the eurozone’s crisis, but at the Group of 20 in Los Cabos the meeting turned into an ambush.

This time, the rebellion against Ms Merkel came from within the eurozone. Mario Monti, who last year received Ms Merkel’s imprimatur after succeeding Silvio Berlusconi as Italy’s prime minister, suggested the eurozone’s €440bn rescue fund should be used to drive down rocketing borrowing costs for both Spain and Italy.

Mr Monti denied Italy was about to seek help, but confirmed there were ongoing discussions about ways to reward “virtuous countries”, such as Italy and Spain, that are nevertheless being punished by financial markets.

“The idea is to stabilize borrowing costs, especially for countries who are complying with their reform goals, and this should be clearly separated from the idea of a bailout,” Mr Monti told a press conference.

The proposal was quickly seized upon by François Hollande, the new French president who has shown no compunction about publicly disagreeing with Ms Merkel about her crisis management plans since he assumed office last month.

Ms Merkel quickly left the summit on Tuesday evening with only brief comments to the media. But back in Berlin on Wednesday, she insisted such discussions were only theoretical and German officials attempted to pour cold water on the idea.
Official Denial

Please note the "official denial" from Italy: "Mr Monti denied Italy was about to seek help." A few more of those denials and it will be 100% clear Italy will "seek help".

How many official denials were there in Spain before it happened? I recall at least a half-dozen in the span of a week, and dozens in the preceding month.

Monti Begs Germany to Stabilize Interest Rates

Also note the self-serving interests of Monti, practically begging (with help from Hollande) to stabilize borrowing costs of “virtuous countries”, such as Italy and Spain.

Monti claimed there were "ongoing discussions" on doing just that. Indeed there were. Alas, those discussions were led by "delusional idiots" including European Commission president Jose Barroso and Herman Van Rompuy, president of the European Council.

Merkel once again poured cold water on the ideas, calling them "theoretical".

Why shouldn't she pour cold water on the idea? The only way to stabilize rates in Italy  and Spain is to destabilize them in Germany.

Questions of the Day

Might I ask why there needs to be a European Commission and a European Council, each with their own president and staff?

Are two delusional idiots better than one?

Why not a European Committee as well? That way we could have three "EC" presidents.

Why Monti's Day's Are Numbered

To understand why Monti's days are numbered, one only need look at a pair of polls, the first in November 2011, the second one a few days ago.

Please consider this now-humorous headline from November 20, 2011: Everybody Loves Mario Monti
According to a new survey conducted by polling company Demos for daily newspaper La Repubblica, 80% of Italians support his new technocratic government. An even higher proportion, 84%, approve of Monti personally.
Now consider this this June 15, 2012 article: Monti's approval rating falls to new low
Monti's approval rating dropped 1 percentage point to 33 percent by mid-June compared to the start of the month, after falling steadily from a high of 71 percent when he became prime minister last year, the SWG-Agora poll showed.

When asked how effective Monti's government is, three quarters of those polled said "not much" or "not at all". Monti's technocrat government took over from Silvio Berlusconi last year to try to transform the economy and avert a Greek-style debt crisis.

The poll also showed a rise in the number of people who planned to vote for comedian Beppe Grillo's Five-Star movement, which has become Italy's second most popular party after dealing a stunning blow to traditional parties in local elections in May.

Twenty-four percent said they would vote for the center-left Democratic Party (PD), up from 23.2 percent. Voter support for Silvio Berlusconi's People of Freedom (PDL) party fell to 15 percent from 15.4 percent.

About 21 percent of survey respondents said they would vote for Grillo's movement, up from 20.2 percent earlier in June.
Beppe Grillo's Five-Star Movement Now Second Largest Party

While everyone was glued to the elections in Greece, far more significant events were happening in Italy and France.

Support for Grillo is at 21 percent, support for PD is  23.2 percent. All it will take is a mere two percentage point shift to put Five Star in the lead.

Why Italy May Exit the Euro Before Spain

To understand the significance of the Five Star Movement, please read Six Reasons Why Italy May Exit the Euro Before Spain; Ultimate Occupy Movement.

The article discusses the Five Star movement from the perspective of reader "Andrea" who is from Italy but now lives in France.

Grillo's personal opinion (not a mandate for the Five Star Movement) is for Italy to get out of the Euro and default on debt.

Socialists Take Over French Parliament

For more about France, please see Greek Election Sideshow; Socialists Win Absolute Majority in France

Early Elections

The nannycrats in Brussels (assuming they are paying attention which is of course debatable) are no doubt in huge fear of early elections in Italy.

On June 4, 2012 Reuters reported Pressure grows in ruling Italian party for early election
Prime Minister Mario Monti no longer has the backing in parliament to adopt more reforms and Italy should consider holding an early election before the year-end, the economic spokesman for a major ruling party told Reuters on Sunday.

"In this political context and with this parliament, Monti does not have the strength to carry out more reforms," said Stefano Fassina, economic spokesman of the centre-left Democratic Party (PD), one of the two main parties Monti depends on for his majority.

"We should verify quickly if there is any chance of reforming the electoral law and if that doesn't work we should consider the possibility of bringing forward the budget law for 2013 and voting in the autumn," he said in an interview.

On Friday, Berlusconi said Italy should leave the euro unless the European Central Bank agreed to pump more cash into the economy, only to play down his remarks the next day as a "joke".
Four Front Battle

Note the brewing four-front battle: Italy, Spain, France, Greece. Of those, Italy is the most crucial.

Time is not on the nannyrats' side.The longer the delay before an election in Italy, the more strength the Five Star movement will gather.

See you in the next Parliament” Beppe Grillo said after the local elections in May.

Let's hope so.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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