I recently spent several weeks in Italy, taking the pulse of the country. The Italian referendum on December 4 turned out exactly how I predicted it would.
The “No” vote won in a landslide, with 59% of the vote versus 41% for “Yes,” with a 70% turnout.
The pro-EU Prime Minister promptly announced his resignation after the crushing defeat.
A surging populist party waits in the wings. They’re now likely a matter of months away from taking power and then holding a new referendum on whether Italy should dump the euro and go back to the lira.
If that happens, Italians will likely vote to leave.
Without Italy, the euro currency would likely disintegrate. Without the euro, the whole European Union—the world’s largest economy—would likely come unglued.
Italy’s referendum is likely just the first of many dominos to fall.
Here are the ones that will come next…
A Banking Crisis
The Italian banking system is a mile-high house of cards.
It’s looking wobblier every day.
The triumph of the “No” side will also accelerate the crises in the Italian banking system, which was already on the verge of collapse.
The collapse now appears imminent. It could start as soon as this weekend.
Banca Monte dei Paschi di Siena (BMPS) will likely be the spark that sets it off.
The Super Bubble in Italian Government Bonds Will Burst
Italy has one of the most indebted governments in the world. It’s borrowed over $2.4 trillion, and its debt-to-GDP ratio is north of 130%. (For comparison, the US debt-to-GDP ratio is 104%.)
But the situation is actually much worse.
GDP measures a country’s economic output. However, it’s highly misleading. Mainstream economists count government spending as a positive when calculating GDP. A more honest approach would count government spending as a big negative.
In Italy, government spending accounts for a whopping 50%-plus of GDP. A more accurate debt-to-GDP ratio would exclude government spending from economic output. I suspect that figure would reveal the Italian government’s hopeless insolvency.
Other Key European Elections
A populist tsunami is washing through Europe. It will drastically change the Continent’s political landscape in a way not seen since before World War II.
This wave will flush away traditional “mainstream” parties and usher in anti-establishment populists who want to leave the euro currency and the European Union.
It’s already hit the UK in the form of Brexit, killing David Cameron’s pro-EU government in the process.
It struck Italy earlier this week, washing away pro-EU Matteo Renzi.
The Bottom Line
My thesis for the collapse of the EU is getting stronger and stronger.
We’re now much closer to seeing – as one Italian politician recently put it – the euro melt away like a gelato left out in the August sun. I think the failure of the Italian referendum marks the beginning of the end for the currency.
I expect the euro to tank soon.
Full article: The Next Domino Falls As Predicted… Here’s What Comes Next (International Man)