Who would have thought that the future of the Euro depended on a lecherous old geriatric?
Yesterday, Berlusconi resigned. Today, Italian borrowing costs soared. 10-year bond yields are now well above the 7 percent - a level at which the Italian fiscal position is unsustainable. Thus, the lesson of today was about the bankruptcy of the Italian political system. As bad as he was, Sleazy Silvio was still a better option than any other Italian politician. He was the best Italy had to offer.
While the rest of us are learning about the appalling limitations of Italian politics, that old bore - Jose Manuel Barroso - issued yet another "stern warning" about the impeding dangers of a collapsing single currency. He has been issuing press releases on this theme for at least four years. He calls for concerted action to protect the Euro, organizes a high level meeting amoun Eurozone leaders, and yet the situation just keeps getting worse.
Barroso's fear that the Eurozone will implode is now rapidly turning into a reality. According to Reuters, French and German officials are already working on an exit plan for insolvent Eurozone members.French President Nicolas Sarkozy implied that a breakup was the best course for Europe when he advocated a two-speed Europe. Northern euro zone countries would "accelerate and deepen integration", while the Southern laggards would be ejected.
Meanwhile, over in Frankfort, the ECB are desperately buying up Italian bonds. It is a forlorn attempt to stabilize financial markets and keep Italian rates down. However, it is a failing strategy. Italian bond rates keep rising; Europe slides ever closer to the abyss.
As the abyss beckons, one horrifying reality is beginning to emerge - there is nothing anyone can do to save Italy. After four years of bailouts, the world has finally produced a financial crisis that can not be resolved by a handout to financial institutions. This isn't a case of "too big to fail". There isn't enough money in the world to save Italy.
After Italy, who is next? Already, that fearful disease - financial contagion - has fingered another potential victim. French interest rates have begun to rise.