Italy and France Feel the Pinch of the Euro and the Cyprus Crisis

It is a Wednesday full of angst in Europe, as deeper economic crevises are appearing in several countries, and in the Euro itself, which dropped against the Dollar to its lowest level in four months, to 1.2771 Dollars to 1 Euro. Meanwhile, the growing investor fear over the Cyprus bank crisis is rapidly being replaced by fears for Italy, as political deadlock continues and the country's main candidate to form a government - something Italy hasn't had since the inconclusive January parliamentary elections - reportedly said that only an "insane person" would want to govern Italy now. Pier Luigi's Bersani, the leader of the center-left coalition, reportedly made the remark after the anti-establishment "Five Star Movement" party headed by comedian Beppe Grillo again refused to form a coalition government with Bersani, dashing his latest attempts to form a governing alliance. Bersani refuses to form a government with the conservative Berlusconi, but few options remain, and it is likely that on Thursday the Italian president will name a caretaker government and call for new elections.After the latest rejection from the anti- establishment movement, Bersani said "only an insane person would want to govern this country, which is in a mess and faces a difficult year ahead," Dow Jones reported. Italian bond sales paid the price on Wednesday, rising above 5% on longer than 5-year bonds. The Italian political stalemate plus the Cyprus crisis drove down the Euro as investors sought to place their money in a safe currency. One place investors will not be putting their money is Cyprus. Cyrpiots will only be allowed to withdraw 300 Euros ($383) in cash each day when the country's banks open for the first time in more than 10 days on Thursday, the state news agency says. Credit and debit cards for payments abroad will be capped at 5000 Euros per day. Checks will not be cashed but they can be deposited into accounts, but then, would anyone want to deposit a check in a Cypriot bank? Meanwhile, armed police officers guarded several trucks carrying containers, presumably full of Euros, arriving at the country's Central Bank in Nicosia. A helicopter hovered overhead. Banks have been shut across the country since March 16 to prevent a run on deposits while politicians worked out a new plan to secure an international bailout. And the bad news in Europe goes on - the French government announced today that for the first time in 30 years, the purchasing power of the French declined, by 0.4%. And since bad news often does not come alone, the French also heard that the unemployment figure, already near historic highs, had risen slightly. Even legislative and political leaders of President Hollande's own Socialist Party began today to express concerns publicly about the ability of Hollande to manage the economy in such a perilous time. Hollande's government has systematically cancelled the economy-bolstering programs put in place by President Sarkozy, many saying this was done simply because they were started by a Gaullist conservative president. In addition, Hollande has raised taxes by 10% and eliminated a Sarkozy program that allowed employees to work more than the French 35-hour per week maximum in order to earn more. Meanwhile French salaries are not rising. One might wonder if François Hollande will see out his 5-year term. And it is entirely probable that Pier Luigi Bersani is absolutely right in saying that "only an insane person would want to govern this country, which is in a mess and faces a difficult year ahead.". That political exaggeration may be prophetic - and it just might soon apply to France and to all of Europe.