Having concentrated all their attention on the financial collapse of Turkey and the collapse of the national currencies of developing countries associated with it, analysts forgot about the eurozone.
However, the current Italian government could provoke an existential crisis in the eurozone, which is dangerous for the whole world.
In the near future, the Italian cabinet will present the state budget for 2019, which, most likely, will contradict the principles of the Maastricht Treaty.
The collapse of the Genoa road bridge last month, killing 43 people, and the statement by Italian Interior Minister Matteo Salvini that a terrible tragedy occurred because of the austerity regime introduced by Brussels, indicates the nature of the new budget.
If you traveled to Italy in recent years, you most likely noticed how poor this country has become since you switched from lira to euro. What is the reason? The Italian economy has hardly grown since the emergence of the single European currency in early 1999, or almost 20 years ago.
Italy’s real GDP has increased by only 0.4% year-on-year since the first quarter of 1999, while real per capita GDP for the same period grew by only 0.1% year on year, the portal zerohedge.com notes.
That is why a systemic event in the global financial market is likely to be triggered by Italy and the eurozone, rather than the “trade war” unleashed by Donald Trump, a collapse of the Chinese currency or revalued stocks on Wall Street.
Nevertheless, they are all interconnected, since the existential risks in the Eurozone are likely to weaken the euro, as it was in the second quarter, which will inevitably lead to a sharp strengthening of the dollar against the currencies of emerging economies. This, in turn, will complicate China's task of controlling capital outflows.
Speaking about the future fate of the eurozone, it is also important not to forget such a thing as the White House’s support for European populists opposing the euro and migrants. Moreover, the Trump administration openly encourages them to actively pursue their goals. This, as you know, is fundamentally different from the policy of Barack Obama.
Trump has repeatedly stated his support for those politicians who in Italy want to abandon the euro. This is not unimportant, since the potential decision of, say, Italy to leave the eurozone looks less risky politically and economically, if it has the support of the American president. Moreover, this support can be strengthened if the Republicans win the upcoming midterm elections in November.
It is also important to remember that Europe has its own election cycle. In May 2019, extremely important elections to the European Parliament will be held. Most likely, the populist parties opposing the EU will conduct a more coordinated and more successful campaign, as a result of which a populist alliance will appear in the European Parliament, capable of attacking many of the foundations of the eurozone from the inside, including the Maastricht Treaty and the "free movement" of migrants across the EU.
However, it will not be easy to turn this alliance, which will most likely have the most diverse views and platforms, into an effective political force. Nevertheless, populists have easily reached consensus on key issues such as migration and Islam. By the way, Hungarian Prime Minister Viktor Orban has already stated that the upcoming European Parliament elections will be the European "referendum on migration and Islam."
And here more than ever, the consequences of the crisis that broke out in Turkey will become more important for the European politicians in power. Brussels and Berlin are well aware that in the event of the collapse of the Turkish economy, a new multimillion wave of migrants from the Middle East will flood into the European Union. In this case, the populist parties will receive the majority of deputy seats not only in the European Parliament, but also in the parliaments of individual European countries.