Italy faces 'horrible martyrdom' while in the eurozone

Telegraph UK ^ | May 20, 2005 | Ambrose Evans-Pritchard

[a freedom-loving italian]

A debt greater than the GDP would cause problems under any currency.

Ok, so what do you do in order to reduce the debt/GDP ratio? You either 1.pay back the debt or 2. make the GDP grow faster that debt. The 1st policy is most likely to cause economic depression and social unrest, hence the 2nd policy makes much more sense to me.

But in order for Italy to make GDP grow faster than debt we don't need a currency that is so overvalued. The Euro is a true pain-in-the-ass for Italian economy: now is cheaper to start up a factory in the US than in South Italy, notwithstanding the fact that South Italy is basically a third-world economy. Do you think this makes sense at all?

[a freedom-loving italian]

1. True, that's was the idea behind joining the Euro. Speaking of inflation: just pay a short visit here and you'll find by yourself...

2. The devaluation was more than justified by the country's economic fundamentals: we have a whole area of this country (South Italy) which is basically a third-world economy and is in no way capable of competing with North-European countries.

3. That's correct in theory. In practice, you might want to consider that a third-world economy such as the South Italian economy simply cannot afford to live without devaluation. BTW even the powerful US economy has seen a devaluation of its currency against the Euro, hasn't it?

4. OK

5. So what are the main points of this survey? Does it take note of the enormous difference between North and South of Italy?

[stefan10]

But if you have to pay so much more for living than there must be inflation because that´s the definition of inflation.
There can be differences according to the individual consumer behavior but that can not explain why all people should think that way.

I still think that in the long run devaluation is not helpful but I really don´t know.