Italy Must Leave the Eurozone

Submitted by Karderinis Isidoros

Italy must return to the lira because joining the euro has been disastrous and sticking with it would be suicidal.

Italy joined the eurozone in 1999 under the leadership of Prime Minister Massimo d’Alema of the “Democratic Left” party. This fateful participation, which entailed the complete loss of independent monetary policy, is undoubtedly the main cause of the disappointing performance of the Italian economy.

Italy’s GDP currently stands at $1.94 trillion and its growth rate is extremely anemic. In January, the country’s central bank estimated that the economy would grow just 0.6% this year. Between 1969 and 1998, Italy’s real per capita GDP increased by 104%. During this time, Italy had domestic monetary policy autonomy thanks to the lira, which it devalued frequently.

Since joining the euro, the devaluation option has been off the table. Italy’s monetary policy is set by the European Central Bank. During the period, 1999-2016 Italy’s real per capita GDP fell by 0.75%. During the same period, Germany’s real per capita GDP grew by 26.1%. While Italians have lost out, Germans have gained since the launch of the euro.

THE ECONOMY IS A MESS

Even as the Italian economy has shrunk, its debt has grown. It now has the third largest state debt in the world after the US and Japan. The debt mountain of $2.7 trillion at 132% of the GDP is far too high. The rescue of the Italian economy is impossible, since it exceeds the capabilities of European states.

Since 1999, the Italian economy has gone steeply downhill in all aspects. Fiat has ceased to dominate the European car market and the country has lost its leading position as a producer of white household appliances. Many factories shut down and several large businesses have relocated to other countries.

Labor market problems, low public and private investment in research and development, a large and inefficient bureaucracy, a dysfunctional, costly and slow-moving justice system, and high levels of corruption and tax evasion are among some of Italy’s intractable problems. With devaluation no longer an option, Italians have unable to put their house in order and kickstart their economy.

Unemployment is at about 11%, the fourth highest in the European Union after Greece, Spain and Cyprus. At the same time, unemployment among young people aged between 15 and 24 amounts to an alarming 30.8%. Poverty has risen to its highest level since 2005. The latest figures reveal five million people living in absolute poverty as of 2017. The figure includes 6.9% of Italian households.

As a result, a deep economic and social crisis is sweep through this Mediterranean country of the European South like a hurricane.

Even as debt, unemployment and poverty rise, Italy has the maximum bank branches per inhabitant in Europe. These branches survive mainly by giving interest and corporate loans, a poor and short-sighted business model. Given that the interest rates in the eurozone are zero, banks are making losses. Their liabilities have are reaching $290 billion, about 15% of Italian GDP. Italian banks are in deep trouble, spelling more trouble for the economy ahead.

The Italian economy is the third largest in Eurozone. In this badly designed monetary union, it is like a tired horse, loaded with bad debts, that is finding it difficult to breathe as it marches uphill on the stones and puddles of an incredibly rigid Eurozone system.

THE EURO IS ADDING TO THE MESS

The eurozone today is nothing else but a combination of conflicting interests among the member countries that make up it. What is of great interest to Italy is not of interest to Germany. What is of value to France does not matter to Greece. And the reconciliation of interests in the era of the common currency has proved to be impossible. This is because Germany, the dominant economic power of the eurozone, has managed to rule and dominate. It is using the euro for its benefit and other countries, instead of resisting or objecting, are bowing and obeying.

The time has come for Italy to leave the Eurozone. So far, Italian politicians have feared short-term negative effects of such an exit. Yet the cost of delaying Italy’s exit from the eurozone will ultimately prove to be far greater than the cost of rupture because of an imminent and impending economic crisis.

The first decision by the coalition government of the Five Star Movement and the Lega to submit a 2019 budget with a deficit of 2.4% defying Brussels was clearly in the right direction. Italian policymakers need to reinforce the economy by strengthening domestic demand and safeguarding the prosperity of the people. In a crisis, they cannot follow Brussels’s strict fiscal regulations that have been authored by Germany.

Italy must at last cease to dance to Berlin’s commands and bid adieu to the euro. By returning to the lira, Italy will regain its political, economic and institutional sovereignty. Despite current problems, Italy still has the second largest industrial capability after Germany in the eurozone at 19% at GDP. The country produces aircraft, cars, weapons, electronic systems, perfumes, shoes and clothes. Its export potential still remains high.

There is another reason to leave the euro. Italy needs energy in the form of cheap oil and gas. By leaving the euro, it could get oil from Libya and gas from Gazprom. This would lower its production costs. Combine that with a flexible national currency and the Italian economy would become extremely competitive.

To sum up, Italy is sailing into the turbulent eurozone sea where powerful winds will sink it. However, if its political leadership decides to change course and return to its national coin, Italy could still save itself.

29 comments

  • The newly formed Brexit party has outperformed the Tories and Labour in EU parliamentary elections?

    No!

    Like

  • de pedantic Dribbler

    David I must admit that I am grossly uninformed on the EU parliament but it seems quite oxymoronic (emphasis on moronic part) that there is a Brexit party actually taking part in EU elections.

    Help me here to grasp the relevence of voters who want to be divorced from the EU taking part in an election for a seat in said EU…

    What am I missing!

    Like

  • @David May 26, 2019 10:31 PM
    As I have said on this blog, the EU is not supposed to be a political union: it was meant to be only an economic union. The rush to have a common currency was predicated more on the wish to establish a state similar to the USA, China and Russia than on hard economic terms. As a result you have countries with disparate economies being told that they need to have the same economic model as outlined by the EU.. The British were smart enough to dodge that trap. The EU will fail. You have 27 countries with different languages, national outlooks and customs and economies: in actual fact you have a de facto Tower of Babel situation. As I said previously, the EU for the past forty odd years has been run by a claque of liberal/globalists, who want to do away with the nation state and who have been pushing multiculturalism and political correctness down the throats of its citizens. Nationalism and self-identity will not go away. The push for multiculturalism is anathema to self identity(this is particularly so when the cultural mores of the cultures are diametrically opposite) and in the long run will result in a lot of bloodshed.

    Liked by 1 person

  • @Dee Word

    Have a read of the link which explains how the European Parliament is meant to work.

    https://en.wikipedia.org/wiki/European_Parliament

    Like

  • Robert Lucas

    In the social sciences we do not see the hard distinctions between the political and the economy which you seem to construct.

    It is generally seen as a political-economy. A symbiotic relationship where one reinforces the other.

    In the case of Europe, fundamentally we have seen the political masters within individual countries, as well as in Brussels, over several decades, deploying the political to change the economy to favour elite forces. Similar actions were and are being taken in Barbados with CARICOM.

    The mass suffering which is emerging (the decline of well-being for the many) is now expressing itself in various ways – far right, far left. And White nationalistic ethos is no doubt the dominant re-emerging political current.

    Like

  • @Pacha

    What is this anti establishment vote we are seeing in the results across Europe? Interest is the traction green parties have been getting.

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  • We are seeing the rise of the Right as well?

    Like

  • @Pachamama May 27, 2019 6:13 AM
    You are right about the elite being favored that is why Macron was elected in France. The European Commission is unelected and seems to have merged politics with the economy to the apparent dismay of countries like Greece and Italy. The commission actually dictates to national governments what economic goals to achieve and what political moves to make vis-a-vis migrants. I am not a sociologist, but the views I expressed ( garnered from the international newspapers and the BBC) so they maybe incorrect.

    Liked by 1 person

  • @Dr. Lucas

    The European Commission is not meant to be the executive arm of the EU parliament?

    Like

  • de pedantic Dribbler

    David u missed my point….I am informed enough on the legislative functioning of the EU parliament … however as I glanced at your blog this morning I was amused and bemused so my question to you should have been this:

    What do the Brits REALLY want by voting in increased numbers
    to continue their participation in the EU legislative functioning for a party strongly supporting a departure from the EU?

    The country is completely fractured and if it were a human being it would be truly described as deeply schizophrenic … Thus it’s fair to say this election result almost evidences profound madness!

    Liked by 2 people

  • @de pedantic Dribbler May 27, 2019 7:53 AM

    Maybe our political expert in the UK, Hal Austin, can answer your questions – lol.

    Liked by 1 person

  • @ Bajan in New York,

    Are you just stupid, or you think it is funny? Have I ever claimed to be a political expert?

    Liked by 1 person

  • @ David
    You could be right; but the point remains,that the Commission is not elected by the population: it is nominated by members of the European parliament. It is a moot point whether the selected parties are doing the biddings of the population or the biddings of their cronies who nominated them. From the noise being made by the nationalist parties, the consensus is that the nominated parties are doing the biddings of those who nominated them.

    Liked by 1 person

  • @Dr. Lucas

    In a union of the EC kind you must expect to cede some aspects of the individual sovereignty. This is the down or upside depends how you look at it.

    Like

  • @ Robert Lucas

    The European Commission is similar to the government, the executive arm of the EU. It is headed by the president, with 28 (27) commissioners or ministers, with an army of well-paid super civil servants.. The European Council is similar to CARICOM, in that its members are heads of governments. The ECJ acts as a constitutional court.
    Legislation is drafted by the commission and approved by the council. According to the legislation, member states are given a set period in which to introduce that legislation to their own jurisdiction.
    With 500m people, it is the biggest market in the world, bigger per capita, than China’s 1.3bn. The number of languages are not important. There are over 100 languages spoken in India and a similar number in China. School children in London alone speak over 100 languages at home.
    What is important are the official languages. In the EU the dominant languages are English and French. All over the EU they speak fluent English, and in Holland they do so better than the English.
    Tell you a story. Every year the French insurance giant AXA, held a week-long residential seminar for financial journalists at one of its chateaus in the South of France.
    The idea was to get together with every senior manager, from the CEO down, to wine, swap ideas, and put the world to right. Journalists came from all over Europe, Asia and North America (wherever AXA did business).
    What was important and very interesting about the gathering was that one minute two guys will be speaking in German, and a Brit will come up and they will switch to English without missing a beat; then a Frenchman will come and they will move on to French in time with the music. It was fascinating. The down side was that most of the Brits only spoke English.
    It drove home to most of us there the cultural importance of the EU.

    Like

  • @ Hal Austin
    You paint an almost utopian picture of the EU. For your sake I hope things work out.

    Like

  • Robert Lucas

    There has never been any enduring critique of Europeans, the elites there, their institutions, etc

    Whereas, one cannot say the same relative to the Bajan politicians, their institutions, political culture etc

    Maybe, such a disposition speaks to a particular state of mental conditioning.

    Of course, your critiques have skillfully avoided the propaganda.

    Like

  • David 6:18

    The Europeans, like peoples everywhere else, are lost. Been failed by end-stage capitalism.

    As a result they are flailing hopelessly, in every which direction, hoping to find the ever elusive answer. We would not be surprised if war is soon seen as the answer. World War 3 or another phase of overt colonialism.

    None of these emerging political currents possess any correctives.

    Like

  • @ Pachamama May 27, 2019 1:15 PM
    You are correct when you state that the Europeans have lost their way. After five-hundred years calling the shots fatigue seems to be the order of the day. Any civilization is doomed once it starts seeking to accommodate outsiders who have made it known that they seek its destruction. It is also lost when it seeks to decry its past (the past that made it who it is) when others who are envious ( who have not contribute much in terms of intellectual inventions to the advancement of humankind) of its achievements try to denigrate it. The Chinese let every one know about their five-thousand year continuous history. The Chinese are not interested in the empty barks of others whose history of inventions are nil. The Chinese put Chinese first The world is a dog eat dog place and it is from this aspect that Trump (one doesn’t need to like the man) is breath of fresh air.

    Like

  • Interesting if only because the regionalists in this part of the world point to the EU has the standard bearer of a well functioning economic union.

    Like

  • Vincent Codrington

    The world is unfolding as it should. An excellent opportunity for a new paradigm. It is time we march to our own drummer. I do not know of any Caribbean regionalist that thought that the EU was an appropriate template to use. But we do see things through different lens ,do we not?

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  • @Vincent

    Start with Peter Wickham and Ricky Singh.

    Like

  • @Vincent

    Can we add the late Sir Shridath Ramphal to the list?

    Like

  • Vincent Codrington

    @ David BU

    What do you think ? Is it a well functioning economic union?
    In another blog it is referred to as a Tower of Babel with several languages and different political objectives.
    More importantly would such a model achieve our social,political and economic objectives? How does it fit in with the concept of a Global economy?

    Like

  • Dribs, as usual U think U comprehend but dont!!!!
    Inside detailed knowledge is critical.

    Why spend $$$$ for an election for 5 months in office?

    Liked by 1 person

  • de pedantic Dribbler

    @Brain, clarify please and educate/inform me.

    To whom do u refer re: Why spend $$$$ for an election for 5 months in office?

    As far as I know all the Brit parties contested the election to EU parliament and I would have to presume they did so with some effort…so who didn’t spend money because they perceived they will lose or leave with Brexit in five months!

    Liked by 1 person

  • @ Robert lucas May 27, 2019 1:43 PM
    “Any civilization is doomed once it starts seeking to accommodate outsiders who have made it known that they seek its destruction. It is also lost when it seeks to decry its past (the past that made it who it is) when others who are envious ( who have not contribute much in terms of intellectual inventions to the advancement of humankind) of its achievements try to denigrate it….”
    ++++++++++++++++++++++++++++++++++++++++++++

    Isn’t such inevitable “destruction” the ‘natural’ order of things, anthropologically speaking?

    Didn’t the Sumerian and Egyptian civilizations suffer a similar fate currently confronting Western Europe and by extension the Americas?

    Isn’t Western European civilization a morphed version of Greek and Roman civilizations both bastards of earlier civilizations?

    Who is that Trojan horse which has ‘invaded’ Western Europe?

    Maybe the Sun is setting on the European empire.

    Maybe the Hindu god Shiva is acting out his karmic role on the Aryan ‘race’.

    Maybe the Sage Rampa was ‘right’ when he postulated that the future belongs to the yellow (and brown) people.

    Like

  • @ Miller May 27, 2019 10:28 PM

    You have spoken via a parable. You are essentially correct in your views.

    Like

  • Has Sonny Ramphal died|?

    Like

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