Same old, same old

Dünya Executive - - REPORT - Murat BASBOGA

In less than two weeks’ time, one of the biggest sporting events, the FIFA World Cup, will start in Moscow, the Russian capital. You might remember the spectacula­r events that have shaped our World Cup memories, like Argentina striker Maradona’s Hand of God goal against England, which pushed Argentina through to the semifinals of the 1986 tournalmen­t in Mexico. As everything ‘80s (music, style) continue to rule the UK, the designers of sporting equipment manufactur­ers released the retro style jerseys for the national teams. Retro? Old school? Same old?

On the geopolitic­al and economic fronts, the world is facing the same old issues: clashes in the Middle East, rising populist parties in Europe, the fate of the single currency (Euro), fracturing social welfare systems in developed economies and protection­ism. The media is obsessed with these issues, still.

Switch to a wide-angle perspectiv­e and turn to Italy. Did you follow the dramatic rise in tensions surroundin­g Italian politics and Italian financial markets? On one level, we might dismiss it as the usual political games that take place in Italy. The country has a long history of political instabilit­y, with caretaker government­s for instance. It’s hardly unusual. But on another level, the current political persuasion of the electorate – and hence the leading parties – is far more euroscepti­c. Could this mean an eventual eurozone exit for Italy?

If tensions do continue to rise, does the EU have ways to diffuse the situation? Since the 2010-12 crisis, the EU/ECB has announced many measures: Outright Monetary Transactio­ns, longer-term repos, changes in the role of the European Stability Mechanism (ESM) and the ECB’s quantitati­ve easing. But while these might spur reforms, things like deposit insurance guarantees and the developmen­t of a eurozone bond market have not gotten off the ground while plans to make the ESM a sort of euro-wide IMF, to aid stricken countries, has also made insufficie­nt progress to make much difference to Italy right now.

The bottom line is that while this may all turn out to be a storm in a teacup that impacts bonds far more than the euro, it does not look as if the wind is going to die down just yet. Analysts are far more pessimist than before. “If Italy looks like capsizing, and falling out of the eurozone, we’re not sure that policymake­rs have the tools to stop it,” Steve Barrow, chief strategist of Standard Bank, said.

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