One of the major questions that has hung for years over the Eurozone was who would revolt first? Voters in the northern ‘donor’ countries, being fleeced in the name of a project that makes ever-decreasing amount of sense (if that’s really possible: it made none to begin with), or voters in the PIIGS, being ground down by a pro-cyclical austerity policy, and, more broadly, the constraints of a single currency for which they were neither politically nor economically ever suited.
Well, the north won that race, with the rise of the euroskeptic Finns Party (the True Finns), the party single-handedly responsible for forcing the Helsinki establishment to insist on collateral on the more recent bailouts. How well that collateral would hold up in the (unlikely) event of a “starburst” break-up of the single currency is a different question, but for now it is part of the reason that Finland has retained its AAA rating.
Now, however, we see in Italy the first substantive ‘debtors revolt’.
The Daily Telegraph’s Jeremy Warner discusses what that might mean:
Financial instability, it seems, is to be replaced by political instability, with electorates grown weary of the repeated rounds of self defeating austerity forced on them by Europe’s political elites. Last time this happened, the response was to impose unelected technocratic governments on the wayward nations, but it is not going to be so easy this time. Italians are in open rebellion, with Mario Monti’s pro-reform Civic Choice finishing a distant fourth. Italians have voted en masse against Berlin’s prescriptive austerity agenda.
Already the signs are that this political explosion will reignite the financial crisis. Italian bond yields spiked, and equity markets fell sharply. It will be recalled that crucial to stilling the financial crisis was the European Central Bank’s promise of “outright monetary transactions”, an open ended commitment to buy sovereign debt without limit. In the end, not a single bond had to be purchased. The promise was enough to break the destruction cycle of deteriorating sovereign debt and banking conditions. It’s possible that markets will now test the ECB’s resolve afresh. However, to avail themselves of the programme, countries have to agree to certain economic and fiscal measures. There is not a snowball’s chance in Hades of the Italian parliament now agreeing to the sort of conditions that would be imposed. Hold onto your hats. It’s about to get interesting again.
Indeed it is, particularly if the non-establishment parties of the north now start—as they should—to question yet again what their countries—Finland, the Netherlands, and the rest of them, are doing in a monetary union that serves no continuing purpose other than to keep alive the catastrophic errors of the past, and, of course, empty the pockets of the frugal.
It was time for the Northern Euro. And it is time for the Northern Euro. This farce has gone on too long.