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Italy, A Parallel Currency and Immigration - Merkel's Worst Nightmare

• By Thomas Luongo

Here comes the flood.  My worst fears of The League's leader Matteo Salvini's ego getting in the way of seizing the political moment by the horns were overblown. It feels good to be wrong every once in a while.

It looks like coalition talks between The League and Five Star Movement (MS5) have been productive.  A new post from Mike "Mish" Shedlock reveals the likely structure of a new parliamentary deal which has neither Salvini nor M5S's Luigi Di Maio taking the role of Prime Minister.

From Mish the Platform contains:

The end of the pension reforms under Mario Monti; Five Star is softer on this point than Lega, but together the two parties can be expected to agree fundamental changes.

A flat tax on companies and people – in other words a massive tax reduction.

A study on the so-called minibot. This is a parallel currency based on future tax receipts, similar to the plans proposed by Yanis Varoufakis in Greece. The minibot was in the Lega's election manifesto. Five Star is far less radical on the eurozone, having dropped the idea of a referendum, but also seeks changes that are incompatible with the the EU fiscal rules. A parallel currency stands a much greater chance of success in Italy, and it would go some way to solving the government's fiscal dilemmas. The open question is whether it would constitute a slippery slope towards euro exit.

And a citizens' income, which is Five Star's big idea, to be implemented next year.

Because M5S and The League are so fundamentally different this platform is going to be schizophrenic.  Basic Income is idiotic, especially with a radical tax reduction.  But, it's the price to getting the deal done.

The most important part of this deal is the realization on both sides that leaving the euro is not politically viable in the near term.

Believe me, I wish it were otherwise.  M5S was smart to soften its stance to get the votes.

That is going to have to be a conversation with Italians over time.

First, the outsiders have to prove they can work together.  Then they have to lead and gain real and visceral support from the people.  Trust first, rebellion later, as it were.

Where they gain immense political capital is in standing up for Italy against Brussels on Immigration.

Immigrant Song

Immigration and economic opportunity are two sides of the same coin, politically.  This link gets stronger the worse the economic conditions are.  When you have a sclerotic democratic socialist system like in most of Europe and then add a technocratic bureaucracy on top of it you have a powder keg of political revolt.

When the foreign bureaucracy demands enforced immigration to lower labor costs and destroy your culture on the altar of Marxism and globalism, it creates the perfect vehicle for the newly-elected rebel parties to gain tremendous political capital with its people by saying no more.

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