Realist, not conformist analysis of the latest financial, business and political news

Italy’s Problem Is The Euro And The European Union

That the average Italian is now less in favour of Europe and the European Union is obvious enough given the election results but what was it that happened? Experience of Europe and the European Union, obviously enough:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Italians used to be fervently pro-EU. What went wrong?
Stefano Montefiori
Italy once stood enthusiastically at the heart of the European project. But over the years disaffection set in[/perfectpullquote]

Wanting to be let into the club is one thing, feelings about being in it after a couple of decades experience another. But what is it that is so bad about it? Exactly the thing that was so desired in the first place:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]I’ll never forget the early hours of 1 January 2002. Crowds of Italians emerged from restaurants and clubs where they’d been celebrating the new year, and rushed to queue at cash dispensers. Families and groups of young people mingled and joked. They were all in a hurry to get their hands on banknotes of the freshly launched European single currency. It seemed like miracle money that would at last replace our old lira and its chronic devaluations, a symbol of Italy’s many woes.[/perfectpullquote] [perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]That night we felt we were entering a new world, a place inhabited by serious, steady people blessed with a respectable currency. Of course we would no longer be millionaires (a worker’s average monthly pay at the time was 1.4m lire) but we were delighted to trade in our millions for the prestige of being European. On that 1 January, about 2.5 million withdrawals were made. Their total value amounted to €184m, setting a record in Europe.[/perfectpullquote]

It’s that lira, a currency and a monetary policy at least vaguely aligned with the needs of Italy’s economy, which was the benefit of not being in the euro, it’s the euro itself which is the cost of that membership of the European club.

And thus the disillusion. There has been just about no growth in GDP per capita in Italy since the turn of the millennium. This is entirely the result of the straitjacket the euro has out upon the Italian economy. The federasts got what they wished for and as the fairy tales exist to remind us, gaining your wishes doesn’t always work out well.

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