The Devil is in the detail!
It has emerged that Helmut Kohl was given numerous warnings about Italy’s level of debt and even warned that Italy posed a “special risk” to the Euro from the very start in 1999.
It is said that Kohl ignored these warnings as he believed that the single currency was Europe’s destiny and that he “felt the weight of history” – so says Der Spiegel magazine reports gleaned from German government papers which it has obtained.
These previously confidential reports make it clear that the facts were well known but the leaders decided to plough on regardless to get the Euro in place.
The decision to invite Italy into the Euro was therefore entirely political and designed to build a large Euro-bloc. This then set the precedent for the inclusion of Greece in a similar fashion again involving glossing over the obvious financial failings.
As early as 1997 the German finance ministry advised Kohl that the Italians had failed to put in place the cost saving measures required to comply with entry requirements and in 1998 a further report confirmed that Italy had not fulfilled conditions for “permanent and sustainable deficit and debt reduction”
There was considerable political pressure brought to bear by other countries including France to ensure that Italy was included and so the rest is history.
It appears that there are lessons to be learnt from this – firstly, the devil is in the detail. I am always concerned when, during the sale & purchase of a business, someone suggests “dotting the i’s and crossing the t’s” at a later date. In my experience potential issues lurk in these dark recesses. The only time you will get everyone to agree is at the outset when they want and need to complete the transaction.
The second lesson is that in every transaction there will be parties with their own agendas who will apply pressure in order to satisfy their own objectives. You must be very aware of this type of pressure as it can derail the whole process.
In order to avoid these issues occurring you need to ensure that you have a competent, robust and experienced person as lead adviser. You must also ensure that you do not leave any loose ends as they will only come to light later when they really matter.
Hawkmoor Associates Limited
This was posted in Bdaily's Members' News section by Phil Dibbs .
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