What keeps Brussels awake at night regarding Italy is that, however their high debt/GDP ratios, however their two decades long of flat GDP growth, Italy manages to have primary surplus. Because when a country has primary surplus, it can default on its external debt and still be able to finance its day to day operations without and sort of internal shock due to lack of external financing. So figure out Italy unexpectedly left the Euro overnight, financing would not be a problem. Spain is a different kind of beast and the internal shock would be epic.



Varou is right that the ECB is making political decisions here. It is also making fiscal policy. A Central Bank that has no Treasury on its back, doesn't that sound every alarm in your brain?



The European welfare state is sucking up all savings and the monnies are directed towards absolute unproductive spending. New debt is issued towards paying for the shortfall between the available savings and the mandatory expenditures imposed by absurd laws (that buy votes).



There is a very obscure component in welfare state that never comes to mainstream media. Fraud. Big fraud. Much larger than tax fraud. And it is silenced, and left almost totally unattended, for ultra obvious electoral reasons.



In Spain, statistics point to a +2 million people receiving a State monthly check fraudulently. People with no legal entitlement are reaping the taxpayer, scandalously more seriously than tax fraud. Average welfare state check is north of 1300 euros monthly, 14 checks a year. That alleged fraud amounts to +36 billion, or 3,6% of GDP. Current public deficit is about 2% of GDP. See what I mean? The Spanish IRS recovers about 1.2% of GDP from tax fraud. Almost nothing (literally a few hundred million) from welfare state fraud.



But the moment a Prime Minister says "go get the fraudsters", she/he creates her/himself about 6.66 million enemies (household median is composed of 3,33 individuals) that would grant an epic social unrest followed by a disastrous defeat at the next general election.



Varou never mentions that fraud. He still has political ambitions. :)



2019 will make History in the books of economic science. In Spain, for the first time ever in a Western country, the average first job salary is now 32 euros less than the average retirement pension (already very low even for Spanish cost of living standards). Tax recollection is 38%. The already current funding gap is beyond belief. And with an inverted demographics, you can not eat what you can not produce. Regardless of how hard your printing presses work.



The choices are easy to spot. Either politicians allow a dirty war to clean out the excesses of population (and legislation), either they engineer a stealth but chronic lowering of living standards, until the cleansing war is allowed at the last minute.

They have opted for the latter.



Why? Because they can. Courtesy of China who is still exporting deflation worldwide. But come the day when China will export inflation. Major currencies will quickly lose their purchasing power. In the meantime, every kind of scapegoat will be blamed to keep the unsuspected herd as misinformed as possible. Now it's the turn of Italy! Greece's glory moments on stage are over.



Or else, there is a third option. Politicians decide to suspend welfare state. Just kidding. No politician would survive a general election. Indeed, they are never re-elected even after winning the "allowed" wars (Churchill, Truman/Roosevelt). But they don't care about future outcomes. They care about current perks.



Welfare state is the iceberg hitting the Titanic. The mathematical certainty is that the system will collapse when the last shock absorber (China) reaches breaking point.



Much talk about populism lately. Populism blames debt, they totally miss the point. The originator of today's existing debt is welfare state. Try to imagine a situation where the gargantuan sums spent in welfare state were indeed invested towards achieving gains in productivity!



Much talk about overall worldwide debt restructuring/pardon/repudiation/offset. Imagine an unemployed father of 4 kids, drowned in debt, with negative equity. Then comes his retail bank manager and tells him his debts have been forgiven! Will he start a new life as a solvent person? Or will he continue to be a profligate individual? People do not change.



No talk about fighting the disease. Give it more aspirin.



We are too many people wanting too many things that we can not produce.



Oh yeah, Italy is tilting towards populism!