Ad Hoc Commentary – the Italian Job

“Sometimes it is the people no one can imagine anything of who do the things no one can imagine.” Alan Turing

The populists in Italy whom no one thought anything about are now unsettling the powers in Brussels. After ten days of negotiations, they finally came together with a socialist-leaning spending plan financed by optimism:


The powers-might-be are probably so unsettled that they are even allowing three-time prime minister Silvio Berlusconi to run for office again:


In 2011, Berlusconi had called for an exit before resigning:

“Silvio Berlusconi considered pulling Italy out of the euro in late 2011 before European financial officials brought about his removal from office, an ex-European Central Bank official has claimed.”


Today, Berlusconi is apparently a changed man:

“Silvio Berlusconi said on Tuesday [Jan 9] that Italy must not leave the euro”


“You know this was never about the gold.”, Stella in The Italian Job 2003 movie.

Some of the bureaucrats in Brussels are probably hoping that the Italian populists fail to get support from their parties for their proposal, and that Italy will go for elections again in June 2018. However, new elections is not necessarily a good thing. Who knows the true intentions of octogenarians and their oligarch friends? It remains to be seen if the Euro is safer in the hands of young populist, or in the hands of a reformed octogenarian.


The Euro had so far been an exceptional currency. Despite all the fears about Grexit, PIGS, and Brexit. Time and again, the Euro had managed to amaze market participants by bouncing back from defeat, when nobody thought much about it. Yours truly remember talking to his old boss in late 2012 where he commented on the resilience of the Euro: Who would have expected the Euro to bounce back so strongly after Mario Draghi’s famous “whatever it takes” speech?


In recent weeks, the Euro is heading into another crisis sparked by Italy. The Italians should never be underestimated – it is a huge economy with a large stock of government debt outstanding. Is Italy just another crisis that the Euro will eventually prevail like it did for every crisis since 2008? Or would the octogenarian be the last one laughing? Only time will tell. To be sure, yours truly is not very optimistic. Perhaps the only way to preserve the common currency is to devalue the Euro to make the debt burden palatable.


Good luck in the markets.