ROME - Is there any chance that Italy, as we have known the country since the end of World War II, will survive the current crisis? I don't think so, and the consequences of this could reverberate as far as to China.

Italy as a political unit is an invention of the 19th century. Before that, it was the center of the Roman empire with the then capital of the world, Roma caput mundi, squeezed between the Gauls of the north and the Greeks of the south; during the Renaissance, it was a was a motely group of very rich and very belligerent states, and for 2,000 years, it was the more or less chaotic geographical space around the Holy See.

Before 1945, Italy was united as an extension and the ideal framework of the Savoy dynasty, a semi-French statelet, developed largely outside the historical mainstream of the Peninsula.

Now, Italy could turn back into its former political entity - and in the aftermath of the huge crisis sweeping Europe, that is possible to occur.

In fact, there are only two options on the table, and both lead to a radical restructuring of the country.

After June 17, the date of the Greek elections, the Germans will decide whether to remove Greece from the eurozone.

If they do so, the euro crunch would likely intensify and Italy might also be ejected from the euro. Then inflation, debt, capital flight, unemployment, and violent social protests could soon turn the country into a new version of Argentina in the late 1990s - or worse.

If conversely the Germans keep Greece in the euro, Italy would also be safe. Yet Italy, like Greece, will have to be made safe, that is the Germans and other Europeans must be assured that Italians and Greeks will pay their debts, and thus some of Rome's political powers will have to be transferred to Brussels.

In fact, Italian Prime Minister Mario Monti is not managing and would not - or could not - do what had been called on to do: radically cut costs and dramatically shrink the debt by decreasing public expenditures, reducing for instance the salaries of MPs, and privatizing large state assets.

So, six months after Monti took office, Italy is now in practice in the same position as a year ago, during the Silvio Berlusconi government. Surely, something has been done - the country is more presentable - but meanwhile the crisis in Europe has deepened and the risks have increased. Therefore the results of these six months are barely sufficient to bring Italy back to where it was.

Then with option 1 (that Italy will exit the euro), social chaos will sweep the old economic and political establishment. This could bring to power comic actor turned radical politician Beppe Grillo (he scored a major victory in recent local elections) or a character more fundamentalist than him, because the crowd once aroused often devours its own ring-leader.

With option 2 (Italy remains in the euro, but Brussels takes the reins), the Italian establishment will also be upset because it is not possible for an Italian MP to have a salary higher than his German colleague - the Italian will have to take, say, half as much as a German MP. Germany or Brussels could require a drastic program of privatization and a major reduction of the Italian, Greek or Spanish bureaucracy.

Certainly option 2 is better than the first because in the second there's the hope that something will remain of the old order. In the first scenario, Greece, Spain or Italy could become a sort of tabula rasa. But option 2 is not easily accomplished because the devolution of powers from Rome to Brussels must be consensual, and it is not possible to think that Brussels will send a military governor to take charge of Rome, Madrid or Athens.

To obtain option 2 instead of option 1, there is not much time - actually only a few weeks. On June 28, an EU summit will deliberate on the fate of euro and after that most stock traders will go on holiday. It will be a time when a few trade movements can create significant volatility in the markets. It was the summer stock exchange that brought down Berlusconi last year.

At this juncture, Monti is failing, no matter why or how, he should push his way forward, but he doesn't, he can't because he lacks the necessary mettle or is being continuously obstructed by all the forces trying to salvage the old status quo. The political parties behind him are even worse failures, as they try to save themselves and not the country. Then the result could easily be that Italy will follow Greece into the hell of social and political chaos, which mirrors the confusion of the southern shore of the Mediterranean.

But Italy is not Greece or Spain, and chaos in Italy means the near certainty of an economic crisis worse than that of 2008, which was sparked by the bankruptcy of Lehman Brothers. Italy is far more important than Lehman. This chaos, which could have a devastating effect on the US economy, it would also undermine the possibilities for the re-election of Barack Obama in America and further undercut the already fragile political fortunes of chancellor Angela Merkel in Germany. Moreover, the specter of Grillo, perhaps the modern movement that most resembles old fascism, shakes the confidence of many well meaning Italians.

The economic and political chaos in southern Europe would create spaces for previously unthinkable new geopolitical competition. Russia could come to the rescue of Greece and create an axis of the Orthodox faith that embraces Athens and reaches up to Belgrade, standing then in the heart of the Mediterranean, a place she always wanted but always failed to reach.

Moreover, Saudi Arabia, Qatar or their satellites could help Spain in exchange for transforming the deserted skyscrapers of the local busted real-estate bubble into minarets. This could lay the foundations for a Muslim re-conquest of Catholic Spain, half a millennium after the devout Christian kings of the peninsula wrested the place from Islam. The political geography of Europe could revert to what it was nine centuries ago, before the Norman's invasion of Southern Italy. Then Islam had reached the Pyrenees, the Byzantine Orthodox empire held the Eastern front of Europe, the ancestors of the western powers, the Germans and Franks, were clasped north of the Alps and Italy was the battleground of all forces, with Islam in Sicily, Greek orthodox up to Naples and from Rome northward a flimsy Germanic control.

All of this could be spiced up by cautious yet effective Chinese investment. Beijing dreads chaos, thus thinks that it is necessary to intervene early for stabilization, without considering that this could be an opportunity for expansion.

These perspectives perhaps are not in the interests of Obama and Merkel - or even France and the UK. Here serious economic problems can become even more serious political issues. Then an immediate intervention by Americans or Germans on fragile Greeks, Spaniards and Italians is possible. But across the Atlantic, there are also those who hope that global economic difficulties will cause Obama to lose the election. And in this, there is a China angle that carries the most serious consequences worldwide.

America, hit by the backlash of a European economic default, without the continuity of the Obama administration and without easy, short-term solutions, might be tempted to find shortcuts, engaging in wars that could, as traditionally wars do, remove outstanding debts. Washington may be hot toward Iran, or more or less cold against its new challenger, China.

A clash between the US and Iran, along with deepening US-China friction, would also be useful to the two possible beneficiaries of the chaos of Europe: Russia and Saudi Arabia, both of which would then have a freer hand in Europe and the Middle East.

Washington should then choose to leave Asia to China and regain Europe and the Middle East, or vice versa. Fighting on all fronts would be very difficult.

In view of this, to avoid dire consequences locally and globally, a strong Italian commitment is essential. Given the challenges in the coming hours and days, will the Italians up to the task? Without a strong hand, the situation may require a semi military US-Anglo-Franco-German intervention to impose a massive reorganization of the Italian finances granting Brussels with many of Rome's powers. Will they do it?

Will these powers look for somebody else, besides Monti, to carry out these plans as their proconsul on the north shore of the Mediterranean? Will this be Grillo or will it be somebody else? According to recent opinion polls Grillo could get over 20% in an election, plus over 30% of Italians would not go to the ballots and abstain from voting. More than 50% of the Italian population is strongly dissatisfied with the present political situation, but the traditional parties are unable to respond. In addition, ruling Greece or Italy is not easy, but this is a long-term problem, while there are short-term issues to be addressed today.

In any case, the old Italy with its old esoteric alchemy of small competing powers is finished. The Italians - or better those who will soon be the heirs of the men and women who up to now call themselves "Italian" - should perhaps already be thinking about the immediate, pressing future.  (2012-06-14 Asia Times)