‘Chicken’ is supposed to be an exciting game, which ends with someone getting splatted on the road by an oncoming vehicle. But this Germany-Italy variant is going on way too long. Frau Merkel and (now) Mario stand in the road, ready to hop out of the way of the next speeding truck, but none passes.
Instead, there’s the odd slow-moving three-wheeler. The interest on Italian debt makes a new peak over 8 percent. So the ECB buys more bonds. The stock markets languish, then find some excuse to rally a bit. European growth goes down a bit, US growth goes up a bit. Frau Merkel does nothing. Mario does nothing.
Frankly, I’m nodding off. Rather than ‘chicken’, this is more like Italian football. It is touted as a great game, but turns out on inspection to be thoroughly dull. Each team tries to win by doing less than the other one.
Perhaps this is how the Great Depression earned its name? The politicians just bored everyone senseless.
Nouriel Roubini has a sensible analysis of why Italian debt will have to be restructured in the FT (sub required). He points out that the idea of a big, one-off Italian wealth tax is unworkable. It will just lead to massive capital flight and falling demand that causes real depression. Sure Italians have cheated their taxes for generations. Sure the professional class is unworthy of the name. But the problem is an institutional one and the only solution is institutional reform. Having another tax would be the equivalent of the standard Italian thing of having another law. What needs to change is systems, mechanisms, beginning with the legal one. So give the more-thoughtful-than-previously-IMF the remit, and send them in.
Tags: financial crisis