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Bilifuduo (98.22)

Berlusconi Resigns.

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November 12, 2011 – Comments (0)

Italian premier Berlusconi has officially resigned as Italian Premier, to the result of ecstatic protesters who danced in conga lines and sang "Alleluia" in celebration. 

http://news.yahoo.com/end-era-italys-berlusconi-resigns-210043160.html

 

Here's a recap of the entire Italian crisis:

 

Cause: 

Italy spent last 20 years with uncontrolled spending leading to huge deficits. It hid its practices from investors and regulators with complex currency and derivative practices just as Greece did, while EU politicians turned a blind eye to its loose fiscal policies. Italy’s stagnating population growth and economy are also exacerbating the economic crisis (1.1% GDP Growth vs. 1.4% inflation rate). Also, until today at least, Italy has had a crippled and barely competent government that had no idea what it was doing until it was too late.

 

Effect: 

Italy’s debt has grown to the 4th largest in the world ($2.6 trillion dollars). Worry over Italy dominated financial markets last week; DJIA dropped 400 points on Wednesday and this political resignation by Berlusconi could have a positive, albeit probably temporary, effect on the volatile market  The Italian 10 year bond yield increased 2% in this year, showing lack of confidence and illiquidity in market as investors flee Italian bonds and stocks. Italy is also suffering from a severe case of stagflation, in which inflation continues to abound while the economy remains stagnant. 

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