Nerves are fraying in the corridors of power of the Eurozone’s third largest economy, Italy. It’s in the grip of a full-blown banking meltdown that has the potential to rip asunder the tenuous threads keeping the European project together.
In his annual speech to the financial market, Giuseppe Vegas, the president of stock-market regulator CONSOB – a consummate insider – delivered a bleak prognosis. The ECB’s quantitative easing program has ‘reduced the pressure on countries, such as ours, which more than others needed to recover ground on competitiveness, stability and convergence.’
But it hasn’t worked, he said. 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.
This post was published at Wolf Street on May 10, 2017.