We here in Britain were lucky – Gordon Brown was Chancellor. OK, well, not lucky exactly, not in totality, as he screwed large parts of the economy with his policies. But those five tests about the euro, he was entirely correct there. For example, we really did have to have a mortgage market like Germany’s – fixed rate for long terms – before we entered into a monetary union with Germany. Without that the effects of interest rate changes would have been grossly exaggerated, as they were in Ireland and Spain.
Yes, this is true, the failure of the euro as a concept wasn’t 2008, it was the booms in those two countries before it.
Mortgages aren’t a great problem in Italy as much of the country doesn’t have one. Property, much more than elsewhere, tends to be inherited not bought.
But here’s why Italy should still leave:
Italy is – or perhaps more importantly, Italians are – being screwed by membership of the euro. The exchange rate is wrong, they can’t vary it, the interest rate is wrong and they’ve no control over it. They simply should not be in monetary union with Germany (or, to be precise, Benelux and Germany might be worthy of monetary union but no one else is).
Therefore Italy should leave the euro. And the politics of that is such that if they do then they’re going to be leaving the EU as well and that’s the end of the project.
We should all be shouting Huzzah! at this of course for the European Union is itself a bad idea and an organisation that no one should belong to.
And here’s the thing. Sure, political dreams and all that, ever closer union etc etc. But to get there it has to be true that there is fiscal union. And the Germans just aren’t going to be willing to pay Italy’s soon to be 150% of GDP government debt pile. And the Italians aren’t going to accept the sort of austerity needed to pay it down either. One or t’other side is going to refuse to do what must be done to keep the euro and EU going. Therefore the euro and EU won’t. For when the economic reality ordure hits the spinning cooler device of political dreams it’s the fan that gets messy not the shit that stops smelling.
The only question is how long oh Lord, how long?