Lega Popularity Rises With Each EU Confrontation: Major Event Coming

The EU conspiracy to oust Berlusconi succeeded because his popularity was on the skids. Lega is a far different story.

Eurointelligence has an interesting on rising Italian yields, Italy's budget deficit, and the inability of the EU and ECB to do any thing about it.

One of the lessons of 2012 is that rising spreads in the eurozone can create a self-fulfilling dynamic once they breach a certain (unknown) level. For Italy, we don’t think spreads have reached that point at the current levels of just above 300bp. But another 50bp or 100bp could trigger a crisis. A rating downgrade is certain, but the markets are watching whether the downgrade will come with a stable or negative outlook. If it is negative, Italian bonds would be on the brink of losing their investment-grade status.

The nervousness is fuelled by defiant comments from Italian ministers. Paolo Savona said that, if the EU opts to reject the Italian budget, it will be up to the people of Italy to decide what to do next. This is where the situation today is so different from that of 2011 when an Italian president colluded with the ECB to remove Silvio Berlusconi. By then, Berlusconi had lost his majority in the chamber of deputies - and the support of the public at large. The Lega, by contrast, is currently seeing its support rise. And this continues with every row with the EU. It is therefore far from clear that a financial crisis would necessarily play into the hands of the EU and produce a more compliant Italian government, or at least a more compliant budget. The opposite might be the case. As of now, we see no signs of the Italian government backing down.

There are good reasons to expect that the situation will come to a head at some point. Italy remains one of the eurozone’s slowest-growing economies. The IMF sees eurozone growth at around 2% this year, and a fraction less next year - while Italy’s growth is a little over half of that. The Italian government’s forecast of a falling deficit was premised on the idea of a fiscal boost generating higher growth. If that is not the case (it won’t be), the deficit is likely to rise above 2.4%. So we are looking at a return of the near-3% deficit and inevitable increases in the debt-to-GDP ratio. This is clearly not sustainable.

We note a comment in Il Sole 24 Ore by Carlo Bastasin, who writes that Italy’s failure to achieve public-sector debt reduction during the short periods of relatively-strong economic growth means that the country is even worse equipped to deal with the next financial crisis than it was in 2008.

Great Pretenders

  • The League and M5S pretend growth will be far bigger than realistic.
  • The EU is willing to pretend as well because it does not want a confrontation with Italy on top of Brexit and confrontations with Poland over its judicial reforms and Hungary over immigration.

Meanwhile, Lega continues to strengthen. This will come to a head sooner or later, sooner if yields blow out and later once Brexit is worked out by March.

Mike "Mish" Shedlock

Comments
No. 1-4
Christian dk
Christian dk

euro / dollars are to high vs yuan so all the USA has to do to stop China "manipulating the fake yuan money against the fake US$ money" is to stop the Nixon/not a crook "temporary" halt on gold conversion and re instate a global currency that nobody can cheat with. and that is GOLD / silver. The USA abandoned gold BECAUSE they wanted to cheat the rest of the world, especially their allies. The ONLY thing that can destroy this planet is obvious, and that is fake money = UNLIMITED credit. Gold and silver is now so cheap that it is below mining costs, yet they still dream of mining the oceans and even the moon/mars and comets.

Alessandro
Alessandro

The Lega and the 5-star Movement combined now have around 60-65% electoral support (as opposed to just above 50% in last March 4 elections). With this in mind, they would rather get to the May 2019 European elections without a financial crisis in their hands. So they will push EU rules (and markets) but stop before breaking point. Of course the situation may get out of hand, Italian yields skyrocket and this would force the yellow-green government to decide between backing down or exit the euro. We shall see. For the moment, every brawl with the EU (Juncker and Macron being their favourite target) increases the government's popularity.

Stuki
Stuki

Germany just needs to get the heck out of this mess. As long as the rest can, no matter how unrealistic, pretend that whatever they do, German taxpayers will be on the hook for it, they'll never bother reforming.

JL1
JL1

Salvini removed "humanitarian protection" category from Italian laws since EU directives do NOT demand it. Italy used to give 20,000-30,000 residence permits per year as "humanitarian protection" to asylum seekers who do NOT qualify for either asylum or subsidiary protection.

This means Italy can send most asylum seekers back home from now on since only few are eligible for asylum or subsidiary protection since arrivals to Italy are mostly from SAFE African countries (over 95% in 2017 came from SAFE countries).

Salvini should also concentrate on sending back home hundreds of thousands of FAILED asylum seekers who were still allowed to stay in Italy by the previous leftist Renzi government despite having their asylum application rejected.

Salvini also wants to DEPORT all violent criminals, rapists and drug dealers back home and poses in front of media with victims of violent migrants after those migrants have been deported away from Italy.

Due to Salvini blocking Italian ports for NGO ships the drownings in Mediterranean Sea have dropped over 50% compared to 2017 according to IOM statistics since fever go out at sea since they know there is not a flotilla of NGO ships waiting 12 miles from Libyan coast waiting to take them to Europe like there was previously.

Another thing Salvini could do put has so far NOT done would be to place all FAILED asylum seekers in detention until they can be removed and sent back home.

Also Salvini could place all asylum seekers in CLOSED refugee camps and CLOSED residences for as long as their asylum application processing takes like EU directives allow. Right now Italy has OPEN asylum seeker centers like Germany which are causing crime and disorder.

Also Salvini should tell authorities to register everyone (which they are still not doing) and this would drop the numbers of arrivals even further since part of attraction of Italy is the possibility to get through Italy to EU countries paying welfare since Italy has NO welfare for migrants even after they get asylum (paradoxically the basic income 5 stars demands might make Italy desirable as destination country instead of as a pass through country).

France has been stopping migrants who avoided registration in Italy and try to get to France or further north since summer of 2015 at France-Italy border even by force and catching those who sneak to France by inspecting the trains between France-Italy on the first stop in France and returning migrants back to Italy handcuffed in vans and also having border police patrol the mountain area and countryside between France and Italy to stop migrants.

In 2014 Italy then led by leftist Renzi gave 170,000 migrants a ride from Libyan coast to Italy but only registered 70,000 as asylum seekers meaning Italy "lost" over 100,000 migrants in a year and these just used the then open borders in EU to go ask for asylum from countries that have generous welfare and give free apartments like Sweden and Germany so there was a migrant crisis going on even before 2015 when Merkel went insane.

France has a policy of NOT taking asylum applications at the border or even inside France's borders and this is completely legal since France is surrounded by SAFE countries. USA could start the same policy on the border with Mexico of NOT taking asylum applications at the border and NOT taking asylum applications from migrants that sneak over the border and just drive them back to Mexico in vans like France drives migrants coming through Italy to France just back to Italy if they sneak to France.

In France migrants can ask for asylum only from local departments that have asylum offices but there has still been lots of applicants since there has been so many migrants that came to Europe through Greece and that are now coming to Europe through Spain and even though France has had border controls on the Italian border they can't have them at all of their borders since that would require multiplying numbers of border police by many times.

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