An Italian Job?

In the 1969 British caper film The Italian Job, Michael Caine assembles a team of criminals to steal a load of gold bullion from Fiat headquarters in Torino. In a series of mad-dash chase scenes and high-wire stunts, the crooks pull off the heist and head off to Switzerland, leaving the city in chaos

In a remarkable parallel, Bunga-Bunga master Silvio Berlusconi has engineered his own high-wire electoral comeback, pushing Italian politics into gridlock and threatening the stability of the European common currency.

Italy’s economy is the third-largest in Europe and the third-most indebted in the world. But much of their debt was incurred over 20 years ago. For most of the past decade, they have run a primary budget surplus, only in deficit by interest payments. And most of their debt is long-term. They do not face an immediate funding crisis.

Nevertheless, the austerity measures of technocratic leader Mario Monti have not set well with the electorate. The economy is in recession and his party finished fourth, behind that of a former communist, a former television clown, and Berlusconi. With Italy’s lower house and upper chamber in flux, it’s hard to tell who’s in charge.

Given their weak economy, Italy needs financial support. The European creditor nations have been willing to help, but they want someone responsible to negotiate with—and that’s just what they don’t have. Like the movie, the outcome is a cliffhanger.

In the movie’s ending, the escape vehicle teeters on the brink of a precipice, the stolen gold pulling it over the edge. In the same way, Italy’s hard-money could be pulling its economy over the edge. And just like the movie, we don’t know how this will end.

Douglas R. Tengdin, CFA

Chief Investment Officer

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