-OpEd-

I've been writing for two years now about the situation in Italy.

Every time I talked about this with European leaders, I felt like the bearer of bad news. In the Middle Ages, they would have hung me long ago.

For months now, the European mutual adoration society hasn’t missed an opportunity to sing the praises of Mario Monti. Everyone simpers around “Super Mario,” a former European Commissioner and Goldman Sachs international advisor – a prerequisite for any Italian aspiring to a European career.

But Prime Minister Mario Monti has failed: he wasn’t able to enforce austerity and he let Italy’s public debt spiral out of control. His balance sheet will show a 100 billion euro increase in spending.

In this context, everybody seems to be oblivious to the excessive debt or the absence of supervision from the former governor of the Banca d’Italia, Italy’s central bank, Mario Draghi, who let the Banca Monti dei Paschi di Sienna make shady derivative deals and commit fraud on his watch. It is worth noting that the bank has ties with the Democratic Party, who won the most votes in the Italian election.

These problems are so bad that they threaten the whole of Europe, and specifically France.

We have also recently learned that the European Central Bank (ECB) acquired half of the Italian debt under its Securities Market Program – 107 billion euros.

There is of course (!) no connection with the fact that the head of the ECB is former Banca d’Italia governor Mario Draghi.

Italy is the last bastion before it is France’s turn to topple. The president of the ECB launched a program of “unlimited” buying of distressed Italian and Spanish bonds to control their interest rates. If you want something done right, it’s always better to do it yourself.

Just the antipasto

Mario Monti, Mario Draghi and Finance Minister Vittorio Grilli did nothing to restructure the Italian debt, whose average duration went from one to six years.

But refusing to consolidate this debt, which reached 2 trillion euros ($2.7 trillion) – 127% of the GDP in 2012, Italy embarked on a suicidal financial strategy: to borrow short-term debt.

The result should make us worry: Italy will need to find 400 billion euros in 2013 – 20% of its debt. More than half of this refinancing will be done using short-term debt and it’s not sure whether investors will want to pitch in.

The ECB, the European Commission, the government of Mario Monti, and the Banca d’Italia all share responsibility for sleeping on the job instead of taking action to limit the situation. Everybody was in denial.

But the Italian voters sent a dangerous message when they gave more than half of the senate's seats to two clowns: an artist and a sexually depraved dishonest man. Italian politicians have lost so much credibility that the voters chose the commedia dell'arte over management by the State.

This isn't even populism anymore, it's the basis of an evolution that might lead to an insurrection.

The only thing we can do now is to brace ourselves. Wall Street lost 200 points after the Italian elections: the global economy is at stake. Nobody has the means to stop a massive sale of Italian debt. If this happens, the whole continent will go down with Italy, maybe even more.

The Greek calamari were only an appetizer, the main course is Italian pasta and it's going to be at least six times harder to digest.

*Georges Ugeux is a Belgium-born investment banker and author, based in New York.