2017-05-12wolfstreet.com

Despite trillions of euros worth of QE, Italy has continued to suffer a 30% loss in competitiveness compared to Germany during the last two decades. And now Italy must begin to prepare itself for the biggest nightmare of all: the gradual tightening of the ECB's monetary policy.

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This is likely to be a major problem for a country that has grown so dependent on that external support. According to the Bank for International Settlements, in 2016, international banks in particular those in Germany reduced their exposure to Italy by 15%, or over $100 billion, half of it in the last quarter of the year... As the appetite for Italian government debt falls, the yields on Italian bonds will rise. The only market participants seemingly still willing and able (for now) to increase their purchase of Italian debt are Italian banks.

... he threatened: "Merely the announcement of a return to a national currency would provoke an immediate outflow of capital that would seriously jeopardize Italy's ability to refinance the world's third biggest public debt." That's the ultimate threat: monetary sovereignty -- its own currency -- under very messy conditions. Let others pick up the pieces of the Eurozone.



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