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The Euro Reaches the End of the Line

July 12, 2011 (EIRNS)—After months of fixation on the Greek debt crisis, the European Monetary Union is now facing a far bigger crisis, one that can very well bring down the whole system in a matter of hours or days. In an interview over the weekend with Corriere della Sera, Italian Finance Minister Giulio Tremonti warned that if he were to be fired by Prime Minister Silvio Berlusconi, it could bring down the entire euro system. Minister Tremonti knew exactly what he was saying.

As of Monday morning July 11, all the European financial press was warning that an Italian debt crisis, tied to a government crisis that has been brewing for months, could bring down the whole system—or force a multi-trillion euro hyperinflationary bailout. The spread between Italian and German bonds reached an all-time high, and the combination of the Italian crisis and the continuing crisis in Spain forced an emergency meeting of ECB and EU leaders on July 10, prior to a scheduled meeting early this week. Germany's Handelsblatt warned July 11 that both Cyprus and Malta were also facing default, and the Italian crisis could soon spread to France.

Also on July 11, the Italian equivalent of the U.S. Securities Exchange Commission imposed daily reporting requirements on short sellers, after the Milan stock exchange lost 7 percent of its value last week, due to a hedge fund coordinated short attack on Italian stocks and bonds.

At the same time, negotiations over a second Greek bailout broke down altogether over the weekend, with the French proposal for a "voluntary" conversion of short-term Greek debt to 30-year bonds rejected by the ECB, and no "Plan B" even on the table. The German press suggested that no Greek bailout deal would likely materialize until September. While the ECB, the IMF, and the interim European stability fund could manage a second Greek bailout, and even fend off a default in Portugal and Ireland for a few weeks more, the magnitude of the Italian and Spanish debt crises is a whole different proposition—one that can bring down the entire EMU system. Tremonti knew exactly what he was saying when he issued his weekend warning via Corriere.

Suddenly, the reality of what Lyndon LaRouche warned months ago is now staring everyone in the face. The euro is doomed, and the only thing that can save Europe from a plunge into a New Dark Age of chaos is a victory for Glass Steagall in the United States, and the establishment of a fixed-exchange rate credit system for the trans-Atlantic region, returning the trillions of euros of toxic gambling paper back to the merchant banks.

The situation is here and now—not next month or next year.