If Italy Exits the Euro, It Could Be the End of the Single Currency

The truth is that Italy should never have joined the euro in the first place

By Roger Bootle and cross-posted from the Sydney Morning Herald

You might think that it would be fitting if the European Union were to come to a sticky end because of Italy. After all, the agreement that established the entity that we now call the European Union was signed in Rome.

For several decades after that 1957 treaty, Italy was one of the strongest supporters of the European project.

Having endured first fascism and then, after the war, unstable and ineffectual government, it suffered none of the angst about the loss of sovereignty that plagued British debates about joining the European Community. Moreover, in the early years of the union, Italy prospered. At one point its GDP overtook the UK’s, an event that was widely celebrated in Italy as “il sorpasso”, the surpassing, or, if you like, the overtaking.

But the overtaking did not last long. Indeed, since the euro was formed in 1999, the Italian economy has grown by a mere 9 per cent, or less than 0.5 per cent per annum. Over the same period, the UK economy has grown by 42 per cent.

This recent disastrous economic performance, plus mounting anxiety about inward migration and the fact that the EU has left Italy to cope with this huge influx on its own, has changed many Italians’ attitudes to the EU. Understandably. These failings go to the heart of the EU project.

The truth is that Italy should never have joined the euro in the first place. And it isn’t only Anglo-Saxon euro pessimists such as myself who believe this. At the time the German Bundesbank was appalled at the idea that Italy should be admitted. After all, even then it had a huge public debt and a history of high inflation offset by frequent currency depreciation

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