Is Italy Ready to Abandon Ship on the Euro?

on Apr 15, 2017 at 1:44 PM in Geopolitics, Economics, Politics, Europe

The euro zone's greatest existential threat may no longer center on small, peripheral countries such as Greece and Portugal dragging it down, but instead on the prospect that its third largest economy, Italy, could abandon ship.

Two recent economic reports show what the euro has meant to Italians and why polls suggest they are no longer keen. One suggests they are poorer as a result of being part of the currency bloc, the other that they are falling further behind their counterparts in main trading partner Germany.

It is a distant risk to the currency bloc that Italy will actually walk away, but not beyond imagination.

Italy's 5-Star movement, which wants to dump the euro through a referendum, has been surging in opinion polls recently, getting as much as a third of the vote in a March Corriere Della Sera poll. The anti-European Union Northern League got another 12 or so percent - and there are others.

But actually leaving the euro zone would come down to whether Italian voters believe 15 years or so of the currency had been good or bad for them.

The recent analyses suggest it has been the latter. Consider, first, how much Italians have to spend.

A December report from Eurostat, the European Union's statistics agency, looked at GDP per capita - the economy divided by its people - in terms of purchasing power between 2004 and 2015.

Assuming a base of 100 for the EU's combined 28 countries, powerhouse Germany rose to 124 from 120 over the period. Italy, however, sank to 96 from 110.

That puts Italy closer to emerging economies like the Czech Republic, Slovakia and Slovenia that it does to Germany. France was pretty much unchanged at 106.

This means that simply in terms of what they can buy, Italians are poorer that they were in 2004, a few years after they swapped the lira.


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