Oh, how the mighty have fallen. In just a matter of days, two of Europe’s most venerable leaders have been toppled. George Papandreou was the third member of the Papandreou dynasty to be prime minister of Greece. Silvio Berlusconi had dominated Italian politics for nearly two decades. But now they are both heading out the door and the international media have been reporting on their resignations with the kind of enthusiasm that is normally reserved for sporting events. “Down goes Papandreou! Down goes Berlusconi!” If you didn’t know better, you would almost be tempted to think that some of the recent news reports were describing a boxing match. But this is what happens when debt problems spiral out of control. It is the leaders who take the fall. So will the resignations of Papandreou and Berlusconi help anything? Of course not. Europe is still headed for a financial collapse of epic proportions.
As I wrote about recently, it has been the fumbling of the Greek debt crisis by European leaders which has set the stage for the burgeoning financial crisis in Italy to go to a whole new level.
Once the Greek debt deal was announced, I warned that it would shatter confidence in the sovereign debt of the rest of the PIIGS and it would cause their bond yields to soar.
That is exactly what has happened.