Milan-based bank, Unicredit , said it was going to be reorganized. It posted a huge third quarter loss because of Greek bonds and the politically imposed “voluntary” haircut.

France has a wealth tax. Spain reimposed its wealth tax this year. Now the idea of a wealth tax is being floated in Italy, too, in the wake of Mario Monti taking over from Berlusconi.

But in Germany the middle and low income taxpayers are getting a tax cut! What a difference!

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The economic crisis is Europe has so far knocked off two leaders — Papandreou and Berlusconi. How many will leave office before it’s finished? Even France’s Sarkozy isn’t safe. German Chancellor Angela Merkel seems the most firmly in the saddle. But then Germany has suffered the smallest and most insignificant crisis.

Of course the last time Germany had a big economic and political crisis in the 1920’s and early30’s, Adolf Hitler took over.

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France is proposing 2 austerity budgets to keep its coveted AAA credit rating. Italy is forming a new government. Though a member of the group of 7, it is being monitored by the IMF. In Greece there’s been political turmoil for months. A new government is being ushered in amid public sector wages being cut.

Germany alone is on track to balance its budget by 2016. What is different?

England is the technical home of modern capitalism. But almost simultaneously it developed in Germany and the United States — and by the way, also Japan. Those four countries have the stock markets that are followed in the history books. That is why it’s so hard for other countries to adopt the same kind of capitalism. It’s indigenous only in those places.

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On 11/11/11 this is the 97th anniversary of the start of World War I, or the Great War. We are almost at the one hundredth anniversary of the Hundred Year’s War that most people don’t realize has never ended. It is the event that ended the nineteenth century and brought us into the modern age — the reason no one writes Victorian novels anymore and no one believes in progress or the perfectibility of mankind. My husband’s great aunt is quoted as saying that it is the reason that “Nothing has been the same since. The world is much nastier.”

Prefigured in the eighteenth century by the French Revolution and the American Revolution, the Great War began the drum roll of liberation movements around the world that is still going on. One of the first was guided by Lawrence of Arabia. This year it continued in the Arab Spring. Practically every war that has gone on in the past hundred years, most notably World War II, was part and parcel of the original conflict.

When will it end? Probably it won’t be over until all the world becomes democratic and capitalistic. It was a great force unleashed by the Industrial Revolution that is serving as an equalizing impulse around the world. World War II may have formally ended in the early 1990’s when Germany signed a treaty reunifying itself, but even on the one hundred anniversary of the Great War we will not sign the Armistice to end all Armistices.

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Italy’s about ready to default. French banks will close because they are exposed to Greek and Italian sovereign debt. France will lose its coveted AAA credit rating. There will be financial chaos in Europe and probably the break up of the Euro Zone, if not the European Union itself which hasn’t come under such strain since World War II.

The European Financial Stability Facility is not yet in place. The ECB doesn’t have the authority to buy bonds directly from member governments such as Italy. It can only buy bonds in the secondary market. The IMF doesn’t want to lend money. China is not interested.

What is Germany’s solution? The Troika. They would put it in place everywhere all the day. Big brother would watch all the countries in the EU and monitor their financial activity. It almost sounds like World War II. Germany wants to make all the countries of Europe like Germany.

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Will the Germans bail out Italy? No one else can do it. The IMF and the United States don’t want to contribute anything. The rest of the EU is either too small or too poor to do it. That leaves Germany to bail out the world’s third largest bond market whose ten-year bonds today jumped above 7%, the level at which other countries such as Greece required bailouts.

Maybe the Germans don’t like giving money to the Greeks. But the Greeks belong to a Balkan state. Italy’s practically right next store, especially to Austria. There are cultural affinities and a religion shared in common between Bavaria and Italy. And Italy was Germany’s ally for most of World War II. Hitler went out of his way to accommodate Mussolini. In the end he tried to save Il Duce. Maybe we will see a little of that quixiotic effort now.

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Merkel said to Greece, “Do what we ask, or you’re out!” She would never dream of saying this to Italy. Likewise, when the European finance ministers met in Brussels on Monday, one of the things they were doing was trying to cultivate China as a way to sell Italian bonds. They would never put themselves out for Greek bonds. Italy is at the center of Europe. There would be no Europe without Greece. Italy just isn’t that important. It’s a Balkan state, on the fringe.

Likewise no one in Germany would ask Russia to buy bonds. Like China, Russia has lots of cash. But unlike China, no one would trust Russia. Besides, the Euro Zone is a German show. Russia would be rigidly excluded. Nor would Russia want to participate in the new kind of German empire with expansionist ambitions.

An interesting P.S. Is provided by TUI, a travel agency. It asked Greek hotels to accept payment in the new Greek currency next year if they drop out of the Euro Zone. The Greeks were offended. No one would ask Italy such a question. And no one would even talk to Russia.

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There is a widening gap between Germany and the rest of the Euro Zone. While France has to pay more to finance their debt and is in danger of having their AAA rating lowered, while Italian bond rates soar, while Greece is mired in political turmoil over the terms of the Greek bailout, and Portugal and Spain don’t fare much better, Germany is getting ready for a tax cut.

The tax cut will go to low to middle income tax payers. Berlin is able to pay for this because of a windfall created by an accounting snafu. Six billion euros will be returned to the German populace w who complain about having the fruits of their labors distributed to wastrels in the south of Europe.

At the same time the unemployment rate is the lowest in two decades. The fiscal deficit fell below 25 billion euros. The German budget will be balanced by 2016.

No one else in Europe can say as much. But then the truth of the matter is that the euro is the German mark in a very thin disguise. That’s why all the other countries wanted to participate in it. They wanted to be lifted up to Germany’s economic standards. But is it possible to sustain?

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The Greeks raced to form a new government this weekend in the wake of the resignation of Prime Minister Panpandreou. They must have one in place by tomorrow for a meeting of the finance ministers. There was a three-way meeting among Papandreou, Samaris, leader of the opposition, and the President of Greece to come up with a temporary government until they can hold an election next year. As soon as it is in place, Papandreous will leave office so that the Greek Parliament can approve the new bailout by the end of October. Venezelos is to lead the delegation in Brussels tomorrow.

I don’t think is move does the Greek bailout any good. Venezelos was against the bailout before. Even if he’s paid lip-service to it in recent days, I wouldn’t trust him.

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Bond yields in Italy hit record highs. The IMF offered them a loan. Berlusconi rejected it but accepted financial monitoring, rare for a country of Italy’s size.

Berlusconi complained about “ancient prejudices” against Italians. It is true that for centuries the Germans haven’t taken Italy seriously. They didn’t expect much of them, and they were the butt of lots of jokes. Italians had a lackluster performance in World War I and World War II.

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