Italians back the EU, but have fallen out of love with the euro

Italy is the only country in the eurozone where per capita output has actually fallen since it joined the euro, writes Gavin Jones.

When the Italian central bank’s deputy governor joined a radio phone-in show last week, many callers asked why Italy didn’t ditch the euro and return to its old lira currency.

A few years ago such a scenario, that Salvatore Rossi said would lead to “catastrophe and disaster”, would not have been up for public discussion.

Now, with the possibility of an election by June, politicians of all stripes are tapping into growing hostility towards the euro.

Many Italians hold the single currency responsible for economic decline since its launch in 1999.

“We lived much better before the euro,” says Luca Fioravanti, a 32-year-old real estate surveyor from Rome. “Prices have gone up but our salaries have stayed the same, we need to get out and go back to our own sovereign currency.”

The central bank is concerned about the rise in anti-euro sentiment, and a Bank of Italy source told Reuters Mr Rossi’s appearance is part of a plan to reach out to ordinary Italians.

Few Italians want to leave the EU. Italy was a founding EU member in 1957 and Italians think it has helped maintain stability in Europe.

And the ruling Democratic Party (PD) is pro-euro and wants more European integration though it complains that the fiscal rules governing the euro are too rigid.

But the three other largest parties are hostile, in various degrees, to Italy’s membership of the single currency in its current form. The PD is due to govern until early 2018, unless elections are called sooner.

The PD’s prospects of victory have waned since its leader Matteo Renzi resigned as premier in December after losing a referendum on constitutional reform, and polls suggest that under the current electoral system no party or coalition is likely to win a majority.

Italians used to be among the euro’s biggest supporters but a Eurobarometer survey published in December by the Commission showed only 41% said the euro was “a good thing”, while 47% called it “a bad thing”.

In the Eurobarometer published in April 2002, a few months after the introduction of euro notes and coins, Italy was the second most pro-euro nation after Luxembourg, with 79% expressing a positive opinion.

Italy is the only country in the eurozone where per capita output has actually fallen since it joined the euro, according to Eurostat data.

Its economy is still 7% smaller than it was before the 2008 financial crisis, and youth unemployment stands at 40%. The right-wing Northern League, the third biggest party, is the most critical of the euro. Party leader Matteo Salvini calls it “one of the biggest economic and social crimes ever committed against humanity.”

The party has promised to pull Italy out of the euro if elected but it only has about 13% of voter support.

The anti-system 5-Star Movement may pose a bigger threat to Italy’s membership of the currency club. Polling roughly level with the PD at about 30%, 5-Star says it will hold a referendum on euro membership.

But Italy’s constitution forbids referendums on matters that are governed by international treaties such as eurozone membership.

5-Star says it could organise a “consultative” ballot to gauge public opinion.

A post last week on its official mouthpiece, the blog of founder Beppe Grillo, was headlined “A referendum on the euro before it’s too late”.

“I would vote to leave the euro as it stands,” lower house deputy Luigi Di Maio, who is widely expected to be 5-Star’s candidate for prime minister, told Reuters.

“We should return to a sovereign currency or, if there is an agreement with the other countries, form a new common currency with new rules.”

Italy’s other significant party, Silvio Berlusconi’s centre-right Forza Italia, is not pushing for outright euro exit, but he has argued that Germany should leave instead, or that Italy should use the euro and the lira at the same time, an idea that many say is unworkable.

Economists in favour of leaving say a devalued currency would revive Italy’s exports. Those wanting to stay in the euro say an exit would trigger a surge in interest rates and inflation, capital flight, a banking crisis and possibly a default on Italy’s public debt.

Reuters


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