After Brexit, after Donald Trump, Italy is next in resisting a less and less dominant “single thought”. The only thing missing is the surprise effect because polls, this time, were accurate, but the foreign media is assessing this event by largely using the term “Italexit”. The right-wing coalition of Matteo Salvini’s Lega and Silvio Berlusconi’s Forza Italia obtained 37% of the votes, followed by the 5 Stars movement, created by the comic Beppe Grillo, but led by young Luigi Di Maio, with 32.6%. The left-center-wing coalition of incumbent President Matteo Renzi gets third place, with 22.8%. Since the two coalitions that won are euro-sceptic, very critical of the euro and against immigration, this means that 70% of Italians are dissatisfied with Rome and Brussels policies. This tells a lot.

But hey, this is Italy, so we can expect the instability in government to last despite this very clear vote. This is because electoral law gives the majority to the coalition obtaining 40% of the votes, and none did. So both Luigi Di Maio, leader of the 5 Stars movement, and Matteo Salvini, who came out ahead of Berlusconi and leads the first party of the right-wing coalition, are claiming the seat of President of the Council, but neither hold a majority. The key to this imbroglio may lie with the 5 Stars movement: Opposed from the start to any coalition, it now seems a little less stubborn, and it has forfeited its referendum on exiting the Euro zone, thus going along with the right-wing coalition, though they all share the same apprehensions about the euro. However, a quite likely scenario would be new elections...

To the point, will the euro withstand this new attack? Italy is the most indebted European country, both in absolute value (€2,200) and GDP percentage (132%, second only to Greece). Italy’s banking system is also, after Greece and Cyprus, the most ailing with €263 billion of bad loans, according to the ECB’s last count. Interest rates starting to rise will put Italy under much pressure.

The Target2 balances chart shows the growing imbalances within the Euro zone. Let’s briefly go over this: the euro is not, contrary to what is believed, a single currency – it is a hybrid one. In fact, the creation of the European Central Bank did not entail the dismantling of national central banks – it was added to them. These banks are part of the European Central Banks System (ECBS), and financial compensations are made with each one another. Anyone can check this by taking a bank note in one’s wallet: there is a letter at the start of the serial number. It will be a U in France, an S in Italy, an X in Germany, etc. In reality, when an Italian buys a Mercedes, it means the German central bank is owed by the Italian central bank. Thus, Germany, an exporting country, is stuck with growing debt from the southern countries which, in turn, are accumulating debt. So Germany has a €800 billion surplus, while Italy has a deficit over €400 billion (Eurocrisismonitor). Such extreme situations are not tenable. All in all, it seems it’s impossible to manage neither the euro nor Italy and that a real crisis is needed to get rid of the abcess.

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