The Prime Ministers of both Italy and Greece, Berlusconi and Papandreou are now set to resign amidst the exploding debt-crises in their countries. They were forced from office not by the hordes of protesters outside, but by pressure from the international financial community, who fear that their defaults could set off a cascading collapse of the EU’s banking system, if not the world. Markets rallied on this news, but as there’s nothing resembling a solution in place, that began to fade fast. As I write this the NASDAQ is down almost 4% from yesterday.

I can’t say that I’m sad to see either of these idiots take a step back from power. Their bungling (and Berlusconi’s “bunga”-ing) has been a universal nightmare for people of all classes, and if the bankers hadn’t fired them their populations probably would have (likely with actual fire). The precedent it sets, though, is a little frightening. Popular revolutions have overthrown the governments of Libya, Tunisia and Egypt this year – the financial elite overthrew two in the past two weeks. It remains to be seen whether something similar could happen in a wealthier country like France or the US, but discontentment on Wall Street (originally some of Obama’s biggest supporters) may soon answer that question too.

What all of this shows is how little power the state and its officials have in the overall power structure. Their role in many ways is more about regulation and enforcement than actual decision-making. We have a ruling class, not a singular ruling institution. Bankers, traders and leaders of institutions like the IMF and World Bank often hold far more practical power than state bureaucrats. Moreover, it’s usually the very same individuals, which raises some serious questions about where any of these institutions begin or end. Interest rates on Italy’s bonds are now setting new records, reflecting a startling lack of confidence on the part of the world’s investors that they’ll ever be repaid in full. Berlusconi, despite his legendary ability to hold onto power despite all sense and reason, can’t stand up to that.

The First World is now getting a first-hand view of what the Third World has been dealing with for decades. Currency market traders have devastated entire continents overnight (especially South America and Asia), and the IMF pushed harsh “structural adjustment” policies which looted their countries in exchange for refinancing their debts. Today, in developed nations, this process is known as “austerity” and it’s no less brutal. These polices didn’t create endless prosperity in Asia or Africa, and they won’t do so here either. The continuing collapse of the Greek economy in the wake of some of the harshest austerity measures yet is evidence enough of that.

The question is, who takes the chairs of Prime Minister now, and what happens to Italy and Greece. Papandreou learned his lesson when he proposed the referendum – standing up to the ECB won’t be tolerated and it looks far less likely now that anybody will be willing to risk any bold leadership. More likely the austerity will continue and more bailouts and bank recapitalizations will be required (perhaps many more). And of course, will the Greek and Italian people stand for any of this?

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