By John Galt
July 29, 2011
A fascinating Reuters story crossed the wires this morning raising the very question of the title of this particular piece. According to the article, Italy was supposed to offer a portion of the key tranche from the European Union crisis designed bailout recently constructed for the nation of Greece. The problem with this theory is that one of the “I’s” in the PIIGS does not have an economic structure much healthier than Greece and thus the question arises as to which nation will be the one to step forward and bail out this tranche to replace Italy.
It is quite doubtful any of the Scandinavian members step forward, the low countries are in no position to aid, and Germany is mired in domestic political fury at Merkel over the announced plan putting pressure on the ruling party to stop acting as Europe’s fireman and to force the weak hands out of the union. The article from Reuters sums the problem up quite nicely:
In a conference call of eurozone finance officials on Thursday, during which the next tranche of emergency loans for Greece was discussed, Italy said it might have to use the “step-out” option in September if its own financing costs rise higher the those on the Greek loans.
“They have not decided one way or another,” said one eurozone source familiar with the conference call details.
Italy’s borrowing costs soared at a closely-watched bond auction on Thursday as investors worried by the eurozone debt crisis and an impasse over the U.S. debt ceiling exacted a high risk premium.
Unless the European Union recognizes that the ultimate finale to this circus is an acknowledged state of default in several of the PIIGS and allows them to withdraw from the monetary union for a decade or less to restructure their nation’s economy, then the misguided idea of mutual interdependency will be usurped by the concept of economic nationalism and ultimately a militant response from the poor sisters of Southern Europe to the EU members who can survive the current economic conditions.
Read the entire Reuters article here from the Athens News: