Douglas Carswell's Blog

How might it all unravel?

No matter how misguided we know the grand project of European Monetary Union to be, no one knows for sure how it might unravel.

Will EMU struggle on for years, held together by a political elite prepared to inflict poverty on millions of Europeans in pursuit of their monetary delusion? Or will it come to a dramatic end, with a string of defaults and decoupling?

Watch what happens to UniCredit, one of Italy's largest banks, for clues.

UniCredit needed to raise money. So yesterday they offered would-be investors the chance to buy new shares in the bank. But there were few takers.

Worse, UniCredit's shares-for-cash offer was massively discounted. In other words, they were offering a slice of the business at way below the supposed value of the bank. A bargain, you might think.

Yet even so, too few people were willing to put money in the business.

If investors no longer have quite so much confidence in one of Italy's largest banks, what is to say that the other kind - those who invest money in deposit accounts with the bank - might not follow suit? I can't help wondering if the failure of UniCredit's rights issue is pretty ominous.

The Euro seems to have managed to turn a banking crisis into a sovereign default crisis into a currency crisis, - at each step resolving nothing.

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