Berlusconi has mentioned in the past of Italy possibly returning to the Lira and has is at it again as he warns of an Italian exit from the eurozone unless the European Central Bank gets more powers to ensure lower borrowing costs.
Reminding the world of just the kind of truthiness that got him sacked originally by that other Italian, the Ex-Goldmanite Mario Draghi, back in November 2011, and which the world has to look forward to when Silvio Berlusconi returns to power some time in 2013, even if not as PM (a position he currently has a snowball’s chance in hell of regaining based on current political polls), Reuters informs us that the Italian, who certainly has not read the Goldman book on status quo perpetuation, just said the unimaginable: the truth. To wit: “If Germany doesn’t accept that the ECB must be a real central bank, if interest rates don’t come down, we will be forced to leave the euro and return to our own currency in order to be competitive.” Berlusconi said in comments reported by Italian news agencies Ansa and Agi. The 76-year-old media tycoon has made similar remarks in the past about the possibility of Italy, or even Germany, leaving the euro, but has often at least partially rectified them later.” Not this time. Now with Germany and the Buba folding like a broken chair, Silvio is coming back and knows he can demand anything and everything, and Germany has no choice but to accept, Merkel reelection in a few months be damned.
Perhaps the former PM who recently got engaged to this 28 year old girl who obviously loves him for his personality has read our little primer on what happens in a Europe in which external devaluation (i.e., FX) is not a possibility, and where another 30-50% drop in PIIGS salaries would be neccesary to restore competitiveness. That, or a return to the Lira of course. And Berlusconi has seen that in the duel between Greece and Germany so far the former (and specifically its creditors) have gotten all the advantage. It is only a matter of time before he parlays that negotiating approach to Italy as well, and in the process destabilizes whatever artificial balance the ECB may have created.
Enjoy the little European respite ladies and gents, because in a few weeks, the Magic Money Tree-free reality is coming back with a vengeance.