He's also a criminal and a joke, and Italy will be well rid of him, maybe soon:
Reporting from Rome— Italy's beleaguered prime minister, Silvio Berlusconi, has survived more than 50 no-confidence votes and multiple accusations of criminal and sexual impropriety, including charges he paid for sex with a 17-year-old girl. But the 75-year-old billionaire may have finally met his match in the bond market.
With dwindling confidence in Berlusconi's ability to manage Italy's affairs — and the Eurozone's debt crisis hanging in the balance — investors Monday pushed up Italian bond yields to a euro-era high of 6.63%. That means higher borrowing costs, and takes the yield ever closer to a point that tipped Greece, Ireland and Portugal over the edge and seeking financial rescue.
… Indeed, the reaction from financial markets adds to "strong pressure for Berlusconi to resign," said Sergio Fabbrini, political science professor at the LUISS Guido Carli university in Rome.
In once sense, this the ultimate referendum on his performance. The bond rates represent the utter failure of the country to right itself.
On the other hand, as much as I would like to see Berlusconi out, there's something unseemly about the bond market* having this much power over a sovereign, democratic country. It reminds me of the rating agencies trying to dictate the size of our own budget cuts during the summer.
Capitalism should be a tool in service of democracy, not the other way around.
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* The bond market is people, my friend.
You think it's unseemly for creditors to punish democracies for being totally dysfunctional. Seriously?
ReplyDeleteShouldn't you be applauding the capitalists for being the only grown-ups in the room?
I contend that Berlusconi exemplifies the totally irresponsible and/or morally corrupt nature of many modern, Western democracies.
How can your complaint be with the bond markets and ratings agencies rather than the voters and leaders of these countries?
Well, let's take one creditor in particular, MF Global, which just declared bankruptcy. Being a major bond buyer, their activities had a direct effect on the bond rates. They were very happy to buy heavily at first, at 40 to 1 leverage, and only when it seemed like the bet turned sour did they begin to lay the blame at Italy's feet.
ReplyDeleteI'm not saying Italy is functional, that's why I contrasted the "ultimate referendum" with the much more mild "unseemly." But fuck the financial markets, right in their face. They aren't helping.
While I find most of the doings of the large financial corporations that actually make up the 'bond market' to be unseemly, I also think that merely following a commonsense set of guidelines concerning the acceptable yield of a government bond is a rational behavior.
ReplyDeleteThe current problem with European debt has little to do with bond traders and everything to do with an economic union that shares a common currency, but does not have a unified economic policy.
If the yield (interest rate) on a state issued bond rises beyond the state's capability to repay the bond plus the yield why would anyone buy it? Since Italy cannot create more Euros to pay for its matured bonds it must either simultaneously reduce spending and create new forms of revenue or accept that it has very limited (or zero) borrowing capability since nobody is interested in making a loan that will not be repaid.
However, I also don't find that the capitalists are being the 'grown-ups in the room' or are deserving of applause. Italy, Greece, Ireland, Spain and Portugal didn't suddenly enact irrational fiscal policies in 2009. The capitalists were perfectly happy to trade in the increasingly irresponsible debt obligations of those nations right up to the point that they deemed the risks too high. Then, when there was no more blood left to be extracted from the stone, the bond traders and ratings agencies clicked their collective tongues in disapproval, stopped buying and issued strongly worded downgrades.
The problem with capitalists is that their only concern is with capital. The problem with modern western democracies is that their leaders look only to the immediate future of the next election and willfully ignore everything else.
No comma after "Berlusconi" in post title.
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