Warning shot

It's the same old story: At first, politicians deny the seriousness of the situation. Then, costs for the disbursement of government bonds rise immensely. A few austerity packages are launched. Then the country is downgraded by a ratings agency. Investors lose confidence in the country, followed by huge increases in government bond interest rates. Politicians hesitate, but then announce they can no longer manage on our own and must resort to the eurozone bailout mechanism.

That's what happened in Greece, Ireland and Portugal. Now, it's Italy's turn. Why should it be different this time?

It must be different this time because at 1900 billion euros, Italy's debt is much bigger than the debt accrued by Greece, Ireland and Portugal. Right now, the eurozone countries' bailout fund is too small to save Italy from bankruptcy. The eurozone nations won't make the necessary resolutions until the beginning of October.

But there does not have to be a bailout yet; Italian Prime Minister Silvio Berlusconi still has the chance to change tack and regain the markets' confidence by really economizing, introducing genuine reform programs and rational, comprehensible policy. What does Berlusconi do? He beats up the messenger of the bad news, the ratings agency. Even the International Monetary Fund (IMF) attested Italy a dismal economic outlook.

Berlusconi, who keeps on dragging his feet on reforms and making headlines with his sexual escapades, is part of the problem. What Italy needs to get a grip on its crisis is a dynamic new government that would rapidly implement austerity plans and growth measures. Without that, Italy is the next candidate for the emergency fund.

By the way, there were changes of government in Greece, Ireland and Portugal in the course of the debt crisis. Why should that not be the case in Italy?

I sincerely doubt that the eurozone would withstand a bailout for Italy - the much smaller crisis in Greece has already almost brought it to the brink of despair. At the moment, the European Central Bank (ECB) is keeping the nation afloat with massive purchases of Italian government bonds. That can't go on much longer. The leisurely "keep it up!" the European finance ministers declared this past weekend at their summit in Wroclaw is by no means a sound concept.

The eurozone must stand united against speculation directed at individual member states - otherwise, it will fail. Persistent talk by US politicians, economists, bankers and hedge fund managers about the end of the euro are not groundless. Huge amounts of money could be made on the financial markets by betting against Italy, Spain or France. We're looking at a busy autumn season for the eurozone countries.

Author: Bernd Riegert/ db
Editor: Rob Turner