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Will Europe Get a ‘Real Leader?’
11/14/2011 6:30 am EST
As the stock market’s recent sharp drop indicates, the Euro crisis needs a real hero on a white horse, says MoneyShow’s Jim Jubak…and he has one candidate that fits the bill.
Look for a hero on a white horse in Italy. Actually, we’re probably looking for more than one hero in the Italian crisis, and we’re not going to get it if it’s just some bureaucrats sitting around making up vague plans.
What the financial markets really want to see—and this is what they said on Wednesday, when the Dow dropped 400 points—what the markets want to see is somebody step forward, a real leader. And it’s got to, I think, come from a number of different places.
First, there needs to be a hero in Italian politics, which means not Berlusconi-like, which means not elections in February or March. There needs to be somebody with some credibility in the financial markets, maybe Mario Monti, who steps forward and is in charge of a caretaker government that has credibility.
There is nothing going on like that in Italy right now. Until there is, the markets are going to basically say, "You know, we don’t believe anything the Italian government, if there is one, is saying to us."
The second thing is that the markets are looking for somebody in the whole wide Eurozone-European Union community to step forward and say, "OK, we’re going to take some ownership of this, we’re going to take some leadership. We’re going to say this is our problem as well as the Italians."
Everybody knows that the Italian crisis could expand, and suck in Spain or France, but they’re acting as if somehow if you build what they keep calling a firewall, and you build it well, probably around next June that’s going to solve the problem. But you really need somebody to step up and say "OK, I’m going to support the markets now, I’m going to support Italian debt, and I’m going to intervene."
I can’t see anybody doing this with the possible exception of Mario Draghi, the new head of the European Central Bank. To do it, he would have to fight through a lot of internal politics at the bank because of the German contingent, which is very much opposed to the idea that the European Central Bank would be the lender of last resort. But I really don’t see anybody else on the continent able to take this role.
So if we don’t get a white horse in Italian domestic politics, if we don’t get some kind of white horse in the markets, I just see this crisis continuing until really the worst of all worlds happen, which is that Italy does indeed wind up infecting Spain or France.
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