Monty might save Germany

A paradox? A possible, reasonable forecast of a complex system derail?


THE € IS DEAD. Point is whether the likely Italy’s default would leave the € alive for how many days, well in advance of this competitive domino (Italy > France), Feldstein is talking about in the paper I refer to here. And, without the €-zone, a decline of Germany down from being the 2nd world economic power would start, as Oscar Giannino was arguing tonight at tg3 night, and eventually carry on (unless countervailing forces emerge, e.g. re-uniting Germany and Europe), until sorting out form the top 10 (Germany will rank after Turkey: with reverse migration?).
Italy might become a stronger industrial power than Germany: the revenge!

Therefore I’d re-phrase Feldstein on the ft: Only Monty can save Germany.

Martin Feldstein: Only Italy can save the euro
The euro currency may soon collapse even though there is no fundamental reason for it to fail. Everything depends on Italy, because financial markets now fear that it may be insolvent.

If the Italian government has to continue paying a seven or even eight per cent interest rate to finance its debt, the country’s total debt will grow faster than its annual output and therefore faster than its ability to service that debt.

If investors expect that to persist, they will stop lending to Italy. At that point, it will be forced to leave the euro. And if it does, the value of the “new lira” will reduce the price of Italian goods in general and Italian exports in particular. The resulting competitive pressure could then force France to leave the euro as well, bringing the monetary union to an end.

The euro currency may soon collapse even though there is no fundamental reason for …
Published in: on November 30, 2011 at 10:43 am  Leave a Comment  
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