The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.NEW YORK ( TheStreet) -- Ousting Silvio Berlusconi won't make Italy's fiscal mess any easier -- with or without him, its debt is impossible and Italy is headed for default. Italy's problems are fundamentally different than some other troubled countries, such as Greece. Like others its social benefits are too generous but substantially curbing those won't bring its books into balance. It is simply too late.
The Germans won't like such purchases, and those are not likely to happen. Even if Berlin went along, the ECB then would be compelled to monetize significantly more of other European sovereign debt, and the inflation that followed would unravel the myth of stability and unity that justifies the euro. Italy is too large for Germany, France and the smaller prosperous countries to rescue. Large purchases of Italian debt by France would surely result in the loss of a AAA rating it already doesn't deserve, push up further French borrowing costs, and put Paris' finances into a negative feedback cycle. With Europe imploding, even Germany's finances would not look quite so pristine. The only sane option Italy really has is to earnestly implement austerity, drop the euro, remake public and private debt in the reestablished lira, and let a falling value for the lira in currency markets impose a haircut on private creditors. Under that scenario, the losses investors took from devaluation would be much less than the losses they would endure in the chaos that Italy's finances could unleash. Readers Also Like: >> 'Great Fortunes' to Be Made in European Stocks >> 10 Top Stock Picks From Morgan Stanley