Un Braccio di Ferro

Italy is rapidly losing patience with the EU:

Something snapped in the Italian psyche last week after the European Central
Bank offered nothing to combat the credit crunch asphyxiating small
business, and more broadly washed its hands of Euroland’s incipient
deflation crisis and catastrophic wastage of its youth.
The next day ex-premier Silvio Berlusconi called for a showdown, or “Braccio
di Ferro”, with northern powers before it loses it chemical, car and steel
industries altogether.
Mr Berlusconi told Il Foglio that Italy’s government – which his
Liberty Party keeps in office – is complicitly serving forces that are
destroying Italy. It must instead confront the north, “and particularly
Angela Merkel’s Germany”, with a stark choice: either they call a halt to
fiscal and monetary contraction, and opt instead for full-blown reflation;
or they must expect the victims to snatch back their own destinies.

And keep in mind, Berlusconi and the Liberty Party are the moderates. Beppo Grillo and Movimento 5 Stelle are even more openly anti-EU.  Italy has to leave the Euro and I’ve always suspected they would be the first to do so.  Evans-Pritchard knows it too:

A game theory study by Bank of America found that Italy would benefit most
among big EMU states from a euro exit. It has a primary surplus, so it would
not face an instant funding crisis. It has fat gold reserves, providing bond
collateral that could be used to raise €400bn in a crisis. Italian household
wealth is €275,200, compared with €195,200 for Germany. A basket case it is not, and Italy’s industrial barons know it. The country
has one great structural problem: it is in the wrong currency with an
intra-EMU exchange rate overvalued by 20pc to 25pc.

Forza Lira!