If Greece was a tragedy, Italy is now a comic opera.
In a Greek tragedy, the main character faces some dilemma, exhibits hubris—overstepping his human limits—and falls. Usually a great deal of irony is used to make the point. For example, in Sophocles’ Oedipus Rex,Oedipus is blind to his errors, until the blind prophet Tiresias leads him to the solution. In the finale, when Oedipus sees what he has done, he blinds himself.
We see all kinds of hubris and irony in the Greek debt drama. Greece overstepped its bounds, borrowing at low interest rates money it couldn’t pay back. There’s irony, too, as German loans to Greece enabled Greek consumers to purchase German-made exports. Now the Germans are upset that the Greeks need more loans to service the loans they have.
Italy, by contrast, has started out as a comic opera. In this classic form, a young, virile main character vows to get the girl; an old busybody gets in the way; and amidst fantastic coincidences and mistaken identities the hero and the heroine are united at the end. Prime Minister Berlusconi has had quite a reputation for personal peccadillos, but now the bill has come due. The busybody market mavens are skeptical that he can settle down and enact the austerity, and so they’re demanding more and more proof, in the form of higher and higher interest rates, that he’s serious.
Comic opera ends happily, due to the hero’s cleverness and charm. Let’s hope that the European leaders can frustrate the market scolds and get their economic drama back on track to avoid a tragic finale.
Douglas R. Tengdin, CFA
Chief Investment Officer
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