Italy minister says should study leaving euro-paper

Reuters ^ | June 3, 2005

[Neville72]

Italy minister says should study leaving euro-paper

Jun 3, 3:21 AM (ET)

Italian Prime Minister Silvio Berlusconi looks on during the Republic day parade in central Rome... Full Image

ROME (Reuters) - Italy should consider leaving the single currency and reintroducing the lira, Welfare Minister Roberto Maroni said in a newspaper interview on Friday.

Maroni, a member of the euro-skeptical Northern League party, told the Repubblica daily Italy should hold a referendum to decide whether to return to the lira, at least temporarily.

He also said European Central Bank President Jean-Claude Trichet was one of those chiefly responsible for the "disaster of the euro."

The euro "has proved inadequate in the face of the economic slowdown, the loss of competitiveness and the job crisis," Maroni said.

In this situation, the answer is to give the government greater power to defend national industry from foreign competition and "to give control over the exchange rate back to the government."

Maroni is a front-line government minister but his views are not believed to be shared by those with far greater sway over economic policy, such as Prime Minister Silvio Berlusconi or Economy Minister Domenico Siniscalco.

Maroni cited Britain as a virtuous example of a country whose economy "grows and develops, maintaining control over its currency."

When it was put to Maroni that Trichet on Thursday dismissed the idea that monetary union could break up, the minister replied: "Sure, he is one of those chiefly responsible for the disaster of the euro."

He added Trichet should try to convince hard-pressed small Italian businessmen that the euro was a success.

Maroni also dismissed the idea that Italy's struggling economy could face an Argentina-style financial disaster if it abandoned the single currency.

"We're already heading toward Argentina, that's why we have to change direction," he said.

Three years ago Argentina defaulted on its public debt.

[Neville72]

First the German hint at returning to the Deutchmark and now the Italians are fondly remembering the Lira. Hmmmm.

[2banana]

I miss getting 100,000 lira for each dollar...made me feel "rich"

[M. Dodge Thomas]

First the German hint at returning to the Deutchmark and now the Italians are fondly remembering the Lira...

One thing Italy and Germany have in common is the more economically and socially advanced areas (“West Germany” and the “Northern Italy”) have spent a decade attempting to finance the economic and social reconstruction of a geographically concentrated retrograde portion of their respective countries (the “East Germany” and "Southern Italy") - it’s sort as if around 1950 the more economically successful half of the US had decided (or been forced by events) to finance the economic revitalization and social reconstruction of the most depressed areas of the America South and Southwest – and do it in a decade.

This has been enormously expensive and socially disruptive (a lot of people in Eastern Germany and Southern Italy don’t like being told that their personal lives and social arrangements must be “reformed” any more than a lot of people in the US would have wanted to hear the same), and so far the people footing the bill often appear to have received nothing but low-wage competition and complaints from their Eastern and Southern brethren in return, so it’s hardly surprising they are pissed.

But then, I suppose there are a lot of Blue state Democrats who feel the same – they watch the net tax flows form their pockets into Red states filled with voters who are contemptuous of Blue State “values”, wonder whey they are footing the bill for their own abuse and the economic development of their competitors, and if they though about it would probably wish they could issue their own currency and levy tariffs on lower costs goods from right-to-work states to protect their jobs.

But somehow I don’t think it works that way – either here or in Europe – such efforts may be able to somewhat cushion the blow of competition from low wage / high productivity competitors, but the inexorable logic of the situation is that the vast majority of citizens in ANY mature industrial economy are caught for the next few decades in a situation where the challenge is to hold average standards of living even with the past rather than to greatly improve them, while at the same time funding massive efforts to preserve national and international stability by improving economic and social standards worldwide. And it’s not as though we can decide to just kick the UN out of NY and just refuse to pay; the bill always gets presented, one way or another, see for example the recent invoice for “stabilizing” Iraq and Afghanistan: $800,000,000,000.00

So welcome to the world of England circa 1920 – the last time a previously world-dominant national economic and monetary system was faced with this sort of challenge.