Matteo Renzi Confused With Bank Bailouts

 

 

            Economists don’t understand that corruption in Italy is a feature of a subsystem that acts as a stable network rather than independent individual events. In many ways corruption is stable compared to the reforms that Prime Minister Matteo Renzi wants for Italy. What’s baffling is Renzi’s conventional belief that he has to resign if his proposals aren’t approved in the upcoming referendum. It’s idiotic to see Renzi back himself into a corner as even his party is mystified by the concept of losing.

 

            In many ways, what this young political leader did was perpetuate the David Cameron effect that the overall referendum is the exponent of the party itself. This is political suicide because normally referendums carry animosity towards the government that have minimal sensibility in running the nation. What Renzi wants is to reduce the size of the Senate and the power of Italian regional governments so that his reforms are passed quicker with fewer obstacles.  

 

            The problem with Italy is that the Senate and regional governments are not willing to capitulate. If they’re not willing to capitulate then these subsystems of government are waging a war against Renzi on a personal level. Italy has dug itself into a hole as debt has skyrocketed to 130% of GDP. The mind frame of the common Italian is crowded with finding resources for an aging population, using their tax dollars to bail out big banks, and dealing with the influx of refugees.

 

            Renzi’s Democratic Party gave the ammunition to the Five Star Movement Party, a populist political group that’s anti-establishment, pro-environment, and skeptical of the European Union. Even if the reforms were defeated in the referendum, Renzi could still be the leader. What he did was establish political suicide for no other purpose than because of his ego.

 

            We can base this ego on certain character traits that Renzi possesses. One is youth and the other is a clear concise rule that a political party has a habit of rebounding even in defeat. His personality has become all-empowering towards his party and therefore he has made the claim to allow his fate to be decided by the general public rather than the issues and reforms that Italy must adhere to.

 

            If the trend has been growing with the Five Star Movement Party then why would any political leader allow the power of the party to dissolve along with them? Renzi’s ideological notion was aimed at a government collapse rather than sustaining the stability of the government. Pier Carlo Padoan, Italy’s Finance Minister, was adamant in saying that Italian banks “do not need (a) rescue.” He continued, “There is no banking problem in Italy, it’s one particular case which is being dealt with … I’m confident this will be successful.”

 

            Being successful may have to do with a bailout that contradicts Italy’s finance minister. It also contradicts the everyday mind frame of Italians that are concerned with immigration, corruption, and embezzled tax dollars. The fragile banking system has spooked investors as non-performing loans have ballooned to $400.7 billion. Renzi’s plan to bailout the banking sector contravenes EU rules and holds Italian bondholders accountable for picking up the tab. However, the bondholders are telling the population that their reputation will be undermined if their assets deteriorate. What Italians are saying is that if bondholders initially took the risk then they deserve to lose. Why should the common Italian taxpayer pick up the tab?

 

            Part of Renzi’s reforms includes raising property taxes. Many property owners are asking themselves if the government is trying to pass the increase in taxes over to student-tourists vacationing in Italy or whether they will fall on Italian citizens. The real problem is that you have a very young and inexperienced politician who understands little about strategy that even his own Democratic Party questions.

 

            Renzi stated that if his reforms aren’t approved then he will resign. There’s no difference between Matteo Renzi and David Cameron. Cameron had 10 Nobel Laureates advocating for Britain to stay in the EU. Ultimately, the British people won and the Nobel Laureates lost. The Italian people know what must be done with Renzi: a confused young man drowning in the complexity of the European Union.

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