Italy is heading for the exit. While it might seem fanciful for one of the founding members to consider leaving the euro, there is a growing sense that no more than a couple of years from now, Rome will once again be administering its own currency.
Figures last week revealed a country in deep crisis. With GDP still almost 10% smaller than before the financial crisis, it is stuck in a deep depression.
All efforts to revive the economy have failed, such is the sclerotic nature of its tax rules, business markets and labour laws. Combined, they have prevented progress to a more effective economy unencumbered by traditional subsidies and benefits.
Meanwhile, Spain and Ireland have contrived to push through reforms, bolster their banks, and move ahead. Even Greece’s economy is growing, according to the most recent official figures.
There was a time when Italy’s middle-income earners would dismiss talk of a euro exit. Their savings were held in euros and all their other assets, especially their property, enjoyed a secure value in the common currency. To leave the euro would be to court a huge drop in wealth.
That fear appears to be evaporating. Beppe Grillo’s Five Star Movement has moved its position to one of outright opposition to the euro. The comedian-turned-politician is promoting a petition to pull out. More broadly, promise after broken promise of growth has undermined support for Brussels and the European Central Bank.
Italians have waited three years for ECB boss Mario Draghi to copy the money-printing exercises at the Bank of England and US Federal Reserve. Draghi talks endlessly of pumping funds into the eurozone’s ailing economies, only to pull back. Last week he was at it again.
But even when a Draghi boost comes, it is unlikely to be effective. Italians know themselves. They need a currency devaluation. It is the only saviour. The Japanese have done it. And as the other major country funding a massive public sector debt, it looks like a good role model.
Make no mistake, a return to the lira will be painful. Yet it looks like something voters are willing to contemplate to stop the economy forever sliding backwards.
