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This Is Sparta!... Well not really. This is Italy & Greece in a Nutshell

So much has been written about the debt crisis in Europe that it can send your head into a confusing spin. The easiest thing is to just tune out.

But don’t. Europe is on the brink of tearing itself apart and the ripple effect around the world, and on your life, could be significant.

After spending last week in Italy, Greece and Germany you get a very real sense of how serious it is. A dismantling of the European Union could send the region in to a serious recession.

For Australians a serious European recession could see prices for our commodities fall, spark a global banking crisis which pushes up interest rates and makes credit harder to get, causes sharemarkets to fall which impacts our superannuation returns and hits consumer and business confidence.

To get an understanding of how this could have happened to Europe, Italy and Greece are great case studies. They’ve been brought to their knees by widespread tax evasion, rampant corruption and a lack of competition.

Here’s a simple guide to what’s happening in Italy and Greece.

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Friday Joke: The difference between Greeks and Italians

Some years ago a small rural town in Italy twinned with a similar town in Greece.

The Mayor of the Greek town visited the Italian town. When he saw the palatialmansion belonging to the Italian mayor he wondered how he could afford such ahouse. The Italian said; "You see that bridge over there? The EU gave us agrant to build a two-lane bridge, but by building a single lane bridge withtraffic lights at either end, this house could be built".

The following year the Italian visited the Greek town. He was simply amazed atthe Greek Mayor's house, gold taps, marble floors, it was marvellous. When heasked how this could be afforded the Greek said; "You see that bridge overthere?"

The Italian replied; "No."

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Comments (2)

Clash of the Ancient Cities: Athens v Rome

The contrast between Rome and Athens is quite stark.

After the whirlwind political upheaval of the last week, you get the sense the Italians don’t quite know what hit them and don’t know what to expect. So they’ve just reverted to their carefree normal life enjoying the all that is great about Italy.

The Greeks on the other hand seem to be about 6 months ahead of the Italians. Reality has well and truly set in and the mood quite sombre and tense.

Adding to the tension this week is the Athens Polytechnic anniversary of when students at the university rebelled against the military junta in 1973 and 40 were killed.

In the last 12 months the Greek economy has contracted 5.2% and the austerity measures are quite brutal… if they get delivered.

The Greek politicians are once again debating the measures and another confidence vote in the new Prime Minister was held again overnight. It’s all down to the politicians… and they’re certainly not helping.

The Greeks know they’re going to be hit with a big stick and they hate the Germans, the European Union and the International Monetary Fund for causing it.

( 2 Votes )

What's Up Italy?

What’s going on in Europe can be confusing and can leave Australians wondering why on earth it matters to us. After spending 3 days in Italy learning more about what’s happening on the ground, you start to get a sense of the financial drama which is unfolding.

Despite the political turmoil of the last week which saw Italy Prime Minister deposed and replaced by an unelected economist with all the right credentials, yields on Italian 10-year Government bonds rose above 7 per cent again last night.

Now 7 per cent was the magic number which saw Greece, Portugal and Ireland ask the European Union for a financial bailout.

What’s worrying the financial markets is that Italy is just too big to rescue.

I know it’s confusing so I’ve jotted down some dot points on what’s going on in Italy.

GLOBAL FINANCIAL CRISIS

. Mark 1… US banks hit by defaulting home loans

. Mark 2… European countries living beyond their means

( 6 Votes )

Euro Heads Roll

A few weeks ago we warned that while authorities can put together massive financial rescue packages for Europe’s sick economies, the recovery will be dependent on politicians implementing the austerity measures necessary to repair their budgets… and for the public to accept those measures.

The last week has reflected just how serious the political risks are to Europe’s future. Both the Greek and Italian prime ministers have been forced to step down and opinion polls show a similar fate is on the cards for most other European leaders… including Germany’s Merkel and France’s Sarkozy.

Nothing appears certain.