Berlusconi Negotiates Like the Greeks Should


Bunga Bunga

Bunga Bunga

Berlusconi says Italy may be forced to leave the euro zone | Reuters.

People like to think that Berlusconi is a joke because of the myriad scandals swirling around him. Remember that he is smart enough to be a billionaire and five-time prime minister of Italy. Throughout his life, he has shown that he is very savvy.

His party is currently behind the Democratic Left by 16 points in third place, so another term as Prime Minister does not appear to be likely at this juncture. Count him among those who think he has a chance. He has already begun negotiating to have the ECB become a buyer of last resort for sovereign debt like a “real central bank.”

While Germany holds the purse strings, it happens to be the country who would lose the most if the eurozone began breaking up. If Italy leaves the eurozone, it would instantly devalue its entire debt load with its products becoming very competitive on world markets. The euro would strengthen leaving Germany with a less competitive currency and a higher real value for its debt.

The Greek government should be negotiating in a similar fashion. Their take-it-or-leave-it offer to the troika should be “forgive the debts or be paid back in drachmas.” I predict that this will be the plan once Greece elects a new government.


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