By Desmond Lachman
Anyone who doubts that the euro crisis is soon to enter a new and more serious phase is simply not paying attention to Italian politics. After a fractious election, which favored comedian Bepe Grillo’s populist Five-Star movement, it took the Italian president more than two months to cobble together the weakest of coalition governments. And last week, in his maiden speech to parliament, Enrico Letta, Italy’s new prime minister, vowed to pursue policies that would end European-imposed austerity.
In taking pains to emphasize that austerity has been killing the Italian economy, Mr. Letto has put his country on a collision course with Mrs. Merkel, the German Chancellor. It would be a gross understatement to say that Germany has a very different take than Italy on the relative merits of fiscal rectitude. This is all too likely to raise acute political tensions within the euro area later on this year when markets again focus on Italy’s very large public debt problem.
Mr.Read More »from Angela Merkel’s Italian Nightmare