new villain emerges in Europe: the euro
Heinrich
A suggestion by Italian cabinet ministers that their country should hold a
referendum on getting out of the common currency drew denunciations from
much of Europe as finance ministers met in Luxembourg on Tuesday, but the
fact they were discussing the issue at all highlighted the fact that the
currency is taking some of the blame for the Continent's economic woes.
Few, if any, think that the euro will stop being the legal currency of much
of Europe, but with French and Dutch voters having stunned the political
establishment by voting against the proposed European constitution, those
who are opposed to other European institutions have been emboldened.
"It is just inconceivable that a country could envisage dropping out of the
euro," said Jean-Claude Juncker, prime minister of Luxembourg and the
current president of the European Union. "The euro belongs to us all."
Hans Eichel, the German finance minister, said the very idea of a country
withdrawing was "nonsense," and Pedro Solbes, the Spanish economy minister,
called the common currency "irreversible."
In Strasbourg, the new French foreign minister, Philippe Douste-Blazy,
called the euro "a plus for today's European economies" and recalled the
days before the currencies were unified, when interest rates in much of
Europe were considerably higher than they are now, raising the cost of
borrowing for European companies and governments.
"Do not call into question monetary Europe," he said.
A similar call came from the president of the European Parliament, Josep
Borrell. "We must ask everyone to avoid frivolity and such brilliant ideas,"
he said. "Imagine the monetary turmoil that would be shaking the European
Union today if it weren't for the euro."
The dispute started when two Italian cabinet ministers from the Northern
League, which is tenuously allied with Prime Minister Silvio Berlusconi,
suggested a referendum on returning to the lira.
Berlusconi did not endorse the idea, but neither did he publicly denounce
it. For the past year, he has blamed the European Central Bank for much of
Italy's economic woes, saying it has kept interest rates too high and
allowed the euro to gain against the dollar.
Nostalgia for national currencies has risen in the past year as European
unemployment has stayed stubbornly high and growth has trailed that of the
United States and Asia. A poll taken late last month by the Forsa
organization for Stern magazine found that 56 percent of Germans preferred
returning to the Deutsche mark. The magazine said the margin of error was
three percentage points.
On one level, the euro has been a great success. Travel within the 12
countries that now use it is far easier, and companies in those countries
can contract with others knowing there is no currency risk involved.
The euro was officially begun at the beginning of 1999; euro coins and bills
became legal currency at the start of 2002.
But economic integration of the euro zone has not been as rapid as some had
hoped, and that has created economic stresses.
"You cannot succeed over any length of time with one monetary policy and 12
fiscal policies," said Robert Barbera, a Wall Street economist with ITG.
That is particularly true when the one monetary policy must apply to very
different economies, ranging geographically from Finland to Portugal and
from Ireland to Greece.
Europe tried to finesse that with an agreement that no government using the
euro would allow its budget deficit to rise to more than 3 percent of gross
domestic product, but in fact a number of countries have exceeded that
limit. Rather than levy fines, as was envisioned, the response has been to
weaken the rule while encouraging governments to do better.
To the extent Europe does pursue excessively easy fiscal policies, the
response would likely be a weakening of the currency, as has happened in
recent weeks. That has aroused concern in Europe even though some, including
Berlusconi, have been loudly calling for a weaker euro for many months.
On Tuesday, the euro rose to $1.2286 in 4 p.m. trading in New York from
$1.2273 on Monday. But the British pound surged to €1.4914 in London, its
highest level against the euro in nearly a year, from €1.4813.
When the euro was being designed, some economists forecast that European
countries would be forced to liberalize their economies because devaluation
within the euro zone would be impossible. In that context, liberalization
refers to making an economy more flexible, with workers easier to hire and
fire. Most European governments have tried to follow that prescription in
one way or another, but anger from voters and unions has forced retreats,
and in some countries, particularly France, liberalization has become very
unpopular.
Before the euro was cast in stone, Italy periodically allowed the lira to
depreciate against the mark. Such devaluations were often violent and were
accompanied by pledges that it would not happen again. But they served to
allow the Italian economy to regain competitiveness with other European
economies where inflation was lower and productivity growth greater. Since
the euro was introduced, those trends have continued, but devaluation ceased
to be an option. Italy is now in a recession, and Berlusconi's coalition did
badly in recent regional elections.
Blaming Europe for national problems has happened in other countries, too,
and pressure has been growing on the European Central Bank to lower its
benchmark short-term interest rate, which is at 2 percent.
Jean-Claude Trichet, president of the ECB, has backed away from previous
statements ruling out a rate cut, although he has not endorsed one.
Lower interest rates might help to stimulate European economies, and a lower
euro could help exporters, but neither would address Italy's competitive
position with other parts of Europe. Its position has also been hurt because
some of its traditional industries, like textiles, have been damaged by
Chinese competition.
It is not clear how Italy, or any other euro-zone country, could withdraw if
it wished to do so. The Maastricht treaty that established the currency has
no withdrawal provision, a fact that was highlighted this year when it
emerged that Greece, the last country to enter the euro zone, had met the
Maastricht economic criteria only by fudging its budget deficit figures.
Europe's response was to demand that Greece promise not to do it again.
There was no discussion of evicting it from the euro zone.
If a country were to insist on withdrawing, presumably it could do so. But
there would be the risk of higher interest rates and a greater reluctance of
foreigners to invest. There would also be issues of debts contracted in
euros, including government borrowing. While all lira debts were
automatically converted to euros at the official rate of 1,936.27 lire per
euro, those who lent euros would no doubt object to having their debt
converted to lire at that rate, particularly if it were clear that the lira
was going to depreciate against the euro.
For now, it is unlikely that talk of countries getting out of the euro will
advance very far, and markets have reacted more calmly than some
politicians. The yield spread between German and Italian government bonds
was 19 basis points, or 0.19 percent, last Thursday, before the Italian
ministers first spoke up. On Tuesday it was 22 basis points.
But the existence of the talk highlights that the financial unification of
Europe is still a work in progress, one that has not advanced as rapidly as
its advocates had expected, and that it is a convenient target for national
politicians when, as now, economic performance is inadequate.
European officials will keep trying.
"We are proceeding too slowly," Trichet said Tuesday in Beijing, where he
was attending a conference of central bankers, "but we are proceeding with
unifying the market."
PARIS Is the euro in danger of dying before it reaches its sixth birthday?
A suggestion by Italian cabinet ministers that their country should hold a
referendum on getting out of the common currency drew denunciations from
much of Europe as finance ministers met in Luxembourg on Tuesday, but the
fact they were discussing the issue at all highlighted the fact that the
currency is taking some of the blame for the Continent's economic woes.
Few, if any, think that the euro will stop being the legal currency of much
of Europe, but with French and Dutch voters having stunned the political
establishment by voting against the proposed European constitution, those
who are opposed to other European institutions have been emboldened.
"It is just inconceivable that a country could envisage dropping out of the
euro," said Jean-Claude Juncker, prime minister of Luxembourg and the
current president of the European Union. "The euro belongs to us all."
Hans Eichel, the German finance minister, said the very idea of a country
withdrawing was "nonsense," and Pedro Solbes, the Spanish economy minister,
called the common currency "irreversible."
In Strasbourg, the new French foreign minister, Philippe Douste-Blazy,
called the euro "a plus for today's European economies" and recalled the
days before the currencies were unified, when interest rates in much of
Europe were considerably higher than they are now, raising the cost of
borrowing for European companies and governments.
"Do not call into question monetary Europe," he said.
A similar call came from the president of the European Parliament, Josep
Borrell. "We must ask everyone to avoid frivolity and such brilliant ideas,"
he said. "Imagine the monetary turmoil that would be shaking the European
Union today if it weren't for the euro."
The dispute started when two Italian cabinet ministers from the Northern
League, which is tenuously allied with Prime Minister Silvio Berlusconi,
suggested a referendum on returning to the lira.
Berlusconi did not endorse the idea, but neither did he publicly denounce
it. For the past year, he has blamed the European Central Bank for much of
Italy's economic woes, saying it has kept interest rates too high and
allowed the euro to gain against the dollar.
Nostalgia for national currencies has risen in the past year as European
unemployment has stayed stubbornly high and growth has trailed that of the
United States and Asia. A poll taken late last month by the Forsa
organization for Stern magazine found that 56 percent of Germans preferred
returning to the Deutsche mark. The magazine said the margin of error was
three percentage points.
On one level, the euro has been a great success. Travel within the 12
countries that now use it is far easier, and companies in those countries
can contract with others knowing there is no currency risk involved.
The euro was officially begun at the beginning of 1999; euro coins and bills
became legal currency at the start of 2002.
But economic integration of the euro zone has not been as rapid as some had
hoped, and that has created economic stresses.
"You cannot succeed over any length of time with one monetary policy and 12
fiscal policies," said Robert Barbera, a Wall Street economist with ITG.
That is particularly true when the one monetary policy must apply to very
different economies, ranging geographically from Finland to Portugal and
from Ireland to Greece.
Europe tried to finesse that with an agreement that no government using the
euro would allow its budget deficit to rise to more than 3 percent of gross
domestic product, but in fact a number of countries have exceeded that
limit. Rather than levy fines, as was envisioned, the response has been to
weaken the rule while encouraging governments to do better.
To the extent Europe does pursue excessively easy fiscal policies, the
response would likely be a weakening of the currency, as has happened in
recent weeks. That has aroused concern in Europe even though some, including
Berlusconi, have been loudly calling for a weaker euro for many months.
On Tuesday, the euro rose to $1.2286 in 4 p.m. trading in New York from
$1.2273 on Monday. But the British pound surged to €1.4914 in London, its
highest level against the euro in nearly a year, from €1.4813.
When the euro was being designed, some economists forecast that European
countries would be forced to liberalize their economies because devaluation
within the euro zone would be impossible. In that context, liberalization
refers to making an economy more flexible, with workers easier to hire and
fire. Most European governments have tried to follow that prescription in
one way or another, but anger from voters and unions has forced retreats,
and in some countries, particularly France, liberalization has become very
unpopular.
Before the euro was cast in stone, Italy periodically allowed the lira to
depreciate against the mark. Such devaluations were often violent and were
accompanied by pledges that it would not happen again. But they served to
allow the Italian economy to regain competitiveness with other European
economies where inflation was lower and productivity growth greater. Since
the euro was introduced, those trends have continued, but devaluation ceased
to be an option. Italy is now in a recession, and Berlusconi's coalition did
badly in recent regional elections.
Blaming Europe for national problems has happened in other countries, too,
and pressure has been growing on the European Central Bank to lower its
benchmark short-term interest rate, which is at 2 percent.
Jean-Claude Trichet, president of the ECB, has backed away from previous
statements ruling out a rate cut, although he has not endorsed one.
Lower interest rates might help to stimulate European economies, and a lower
euro could help exporters, but neither would address Italy's competitive
position with other parts of Europe. Its position has also been hurt because
some of its traditional industries, like textiles, have been damaged by
Chinese competition.
It is not clear how Italy, or any other euro-zone country, could withdraw if
it wished to do so. The Maastricht treaty that established the currency has
no withdrawal provision, a fact that was highlighted this year when it
emerged that Greece, the last country to enter the euro zone, had met the
Maastricht economic criteria only by fudging its budget deficit figures.
Europe's response was to demand that Greece promise not to do it again.
There was no discussion of evicting it from the euro zone.
If a country were to insist on withdrawing, presumably it could do so. But
there would be the risk of higher interest rates and a greater reluctance of
foreigners to invest. There would also be issues of debts contracted in
euros, including government borrowing. While all lira debts were
automatically converted to euros at the official rate of 1,936.27 lire per
euro, those who lent euros would no doubt object to having their debt
converted to lire at that rate, particularly if it were clear that the lira
was going to depreciate against the euro.
For now, it is unlikely that talk of countries getting out of the euro will
advance very far, and markets have reacted more calmly than some
politicians. The yield spread between German and Italian government bonds
was 19 basis points, or 0.19 percent, last Thursday, before the Italian
ministers first spoke up. On Tuesday it was 22 basis points.
But the existence of the talk highlights that the financial unification of
Europe is still a work in progress, one that has not advanced as rapidly as
its advocates had expected, and that it is a convenient target for national
politicians when, as now, economic performance is inadequate.
European officials will keep trying.
"We are proceeding too slowly," Trichet said Tuesday in Beijing, where he
was attending a conference of central bankers, "but we are proceeding with
unifying the market."
PARIS Is the euro in danger of dying before it reaches its sixth birthday?
A suggestion by Italian cabinet ministers that their country should hold a
referendum on getting out of the common currency drew denunciations from
much of Europe as finance ministers met in Luxembourg on Tuesday, but the
fact they were discussing the issue at all highlighted the fact that the
currency is taking some of the blame for the Continent's economic woes.
Few, if any, think that the euro will stop being the legal currency of much
of Europe, but with French and Dutch voters having stunned the political
establishment by voting against the proposed European constitution, those
who are opposed to other European institutions have been emboldened.
"It is just inconceivable that a country could envisage dropping out of the
euro," said Jean-Claude Juncker, prime minister of Luxembourg and the
current president of the European Union. "The euro belongs to us all."
Hans Eichel, the German finance minister, said the very idea of a country
withdrawing was "nonsense," and Pedro Solbes, the Spanish economy minister,
called the common currency "irreversible."
In Strasbourg, the new French foreign minister, Philippe Douste-Blazy,
called the euro "a plus for today's European economies" and recalled the
days before the currencies were unified, when interest rates in much of
Europe were considerably higher than they are now, raising the cost of
borrowing for European companies and governments.
"Do not call into question monetary Europe," he said.
A similar call came from the president of the European Parliament, Josep
Borrell. "We must ask everyone to avoid frivolity and such brilliant ideas,"
he said. "Imagine the monetary turmoil that would be shaking the European
Union today if it weren't for the euro."
The dispute started when two Italian cabinet ministers from the Northern
League, which is tenuously allied with Prime Minister Silvio Berlusconi
Barbera, a Wall Street economist with ITG.
That is particularly true when the one monetary policy must apply to very
different economies, ranging geographically from Finland to Portugal and
from Ireland to Greece.
Europe tried to finesse that with an agreement that no government using the
euro would allow its budget deficit to rise to more than 3 percent of gross
domestic product, but in fact a number of countries have exceeded that
limit. Rather than levy fines, as was envisioned, the response has been to
weaken the rule while encouraging governments to do better.
To the extent Europe does pursue excessively easy fiscal policies, the
response would likely be a weakening of the currency, as has happened in
recent weeks. That has aroused concern in Europe even though some, including
Berlusconi, have been loudly calling for a weaker euro for many months.
On Tuesday, the euro rose to $1.2286 in 4 p.m. trading in New York from
$1.2273 on Monday. But the British pound surged to €1.4914 in London, its
highest level against the euro in nearly a year, from €1.4813.
When the euro was being designed, some economists forecast that European
countries would be forced to liberalize their economies because devaluation
within the euro zone would be impossible. In that context, liberalization
refers to making an economy more flexible, with workers easier to hire and
fire. Most European governments have tried to follow that prescription in
one way or another, but anger from voters and unions has forced retreats,
and in some countries, particularly France, liberalization has become very
unpopular.
Before the euro was cast in stone, Italy periodically allowed the lira to
depreciate against the mark. Such devaluations were often violent and were
accompanied by pledges that it would not happen again. But they served to
allow the Italian economy to regain competitiveness with other European
economies where inflation was lower and productivity growth greater. Since
the euro was introduced, those trends have continued, but devaluation ceased
to be an option. Italy is now in a recession, and Berlusconi's coalition did
badly in recent regional elections.
Blaming Europe for national problems has happened in other countries, too,
and pressure has been growing on the European Central Bank to lower its
benchmark short-term interest rate, which is at 2 percent.
Jean-Claude Trichet, president of the ECB, has backed away from previous
statements ruling out a rate cut, although he has not endorsed one.
Lower interest rates might help to stimulate European economies, and a lower
euro could help exporters, but neither would address Italy's competitive
position with other parts of Europe. Its position has also been hurt because
some of its traditional industries, like textiles, have been damaged by
Chinese competition.
It is not clear how Italy, or any other euro-zone country, could withdraw if
it wished to do so. The Maastricht treaty that established the currency has
no withdrawal provision, a fact that was highlighted this year when it
emerged that Greece, the last country to enter the euro zone, had met the
Maastricht economic criteria only by fudging its budget deficit figures.
Europe's response was to demand that Greece promise not to do it again.
There was no discussion of evicting it from the euro zone.
If a country were to insist on withdrawing, presumably it could do so. But
there would be the risk of higher interest rates and a greater reluctance of
foreigners to invest. There would also be issues of debts contracted in
euros, including government borrowing. While all lira debts were
automatically converted to euros at the official rate of 1,936.27 lire per
euro, those who lent euros would no doubt object to having their debt
converted to lire at that rate, particularly if it were clear that the lira
was going to depreciate against the euro.
For now, it is unlikely that talk of countries getting out of the euro will
advance very far, and markets have reacted more calmly than some
politicians. The yield spread between German and Italian government bonds
was 19 basis points, or 0.19 percent, last Thursday, before the Italian
ministers first spoke up. On Tuesday it was 22 basis points.
But the existence of the talk highlights that the financial unification of
Europe is still a work in progress, one that has not advanced as rapidly as
its advocates had expected, and that it is a convenient target for national
politicians when, as now, economic performance is inadequate.
European officials will keep trying.
"We are proceeding too slowly," Trichet said Tuesday in Beijing, where he
was attending a conference of central bankers, "but we are proceeding with
unifying the market."
Barbera, a Wall Street economist with ITG.
That is particularly true when the one monetary policy must apply to very
different economies, ranging geographically from Finland to Portugal and
from Ireland to Greece.
Europe tried to finesse that with an agreement that no government using the
euro would allow its budget deficit to rise to more than 3 percent of gross
domestic product, but in fact a number of countries have exceeded that
limit. Rather than levy fines, as was envisioned, the response has been to
weaken the rule while encouraging governments to do better.
To the extent Europe does pursue excessively easy fiscal policies, the
response would likely be a weakening of the currency, as has happened in
recent weeks. That has aroused concern in Europe even though some, including
Berlusconi, have been loudly calling for a weaker euro for many months.
On Tuesday, the euro rose to $1.2286 in 4 p.m. trading in New York from
$1.2273 on Monday. But the British pound surged to €1.4914 in London, its
highest level against the euro in nearly a year, from €1.4813.
When the euro was being designed, some economists forecast that European
countries would be forced to liberalize their economies because devaluation
within the euro zone would be impossible. In that context, liberalization
refers to making an economy more flexible, with workers easier to hire and
fire. Most European governments have tried to follow that prescription in
one way or another, but anger from voters and unions has forced retreats,
and in some countries, particularly France, liberalization has become very
unpopular.
Before the euro was cast in stone, Italy periodically allowed the lira to
depreciate against the mark. Such devaluations were often violent and were
accompanied by pledges that it would not happen again. But they served to
allow the Italian economy to regain competitiveness with other European
economies where inflation was lower and productivity growth greater. Since
the euro was introduced, those trends have continued, but devaluation ceased
to be an option. Italy is now in a recession, and Berlusconi's coalition did
badly in recent regional elections.
Blaming Europe for national problems has happened in other countries, too,
and pressure has been growing on the European Central Bank to lower its
benchmark short-term interest rate, which is at 2 percent.
Jean-Claude Trichet, president of the ECB, has backed away from previous
statements ruling out a rate cut, although he has not endorsed one.
Lower interest rates might help to stimulate European economies, and a lower
euro could help exporters, but neither would address Italy's competitive
position with other parts of Europe. Its position has also been hurt because
some of its traditional industries, like textiles, have been damaged by
Chinese competition.
It is not clear how Italy, or any other euro-zone country, could withdraw if
it wished to do so. The Maastricht treaty that established the currency has
no withdrawal provision, a fact that was highlighted this year when it
emerged that Greece, the last country to enter the euro zone, had met the
Maastricht economic criteria only by fudging its budget deficit figures.
Europe's response was to demand that Greece promise not to do it again.
There was no discussion of evicting it from the euro zone.
If a country were to insist on withdrawing, presumably it could do so. But
there would be the risk of higher interest rates and a greater reluctance of
foreigners to invest. There would also be issues of debts contracted in
euros, including government borrowing. While all lira debts were
automatically converted to euros at the official rate of 1,936.27 lire per
euro, those who lent euros would no doubt object to having their debt
converted to lire at that rate, particularly if it were clear that the lira
was going to depreciate against the euro.
For now, it is unlikely that talk of countries getting out of the euro will
advance very far, and markets have reacted more calmly than some
politicians. The yield spread between German and Italian government bonds
was 19 basis points, or 0.19 percent, last Thursday, before the Italian
ministers first spoke up. On Tuesday it was 22 basis points.
But the existence of the talk highlights that the financial unification of
Europe is still a work in progress, one that has not advanced as rapidly as
its advocates had expected, and that it is a convenient target for national
politicians when, as now, economic performance is inadequate.
European officials will keep trying.
"We are proceeding too slowly," Trichet said Tuesday in Beijing, where he
was attending a conference of central bankers, "but we are proceeding with
unifying the market."
DVH
hummingbird <VXWXCU...@spammotel.com> wrote in message
news:8pvda1hsvredetg4l...@4ax.com...
> On Wed, 8 Jun 2005 11:38:37 +0200, "Heinrich"
> <Hein...@Eurocratsnet.tk>
> mysteriously appeared thru the usenet mist to inform us thus...
>
> >PARIS Is the euro in danger of dying before it reaches its sixth
birthday?
> >
> >A suggestion by Italian cabinet ministers that their country should hold
a
> >referendum on getting out of the common currency drew denunciations from
> >much of Europe as finance ministers met in Luxembourg on Tuesday, but the
> >fact they were discussing the issue at all highlighted the fact that the
> >currency is taking some of the blame for the Continent's economic woes.
>
> It is the worst performing of the five major economies in the EU and
> contrary to the Italian diversion it's not due to the euro currency.
> Italy's economy has been sinking for years due to corruption,
> incompetence and industrial inefficiency.
There's a lot less corruption than there was in the 80s. Government and EU
contracts are better monitored, the profligate building contracts in the
south offer diminished returns and are fewer now that Italy's population is
shrinking, the political structure has changed fairly radically even on a
local basis where money was to be had. The mafia is quiet, gearing up for
the colossal sums that will be sloshing around when they start building the
bridge from Italy to the mainland (I mean Sicily).
Anyway, the people calling for the referendum might be cabinet ministers,
but they're also nutters from the Lega Nord - Bossi's separatist party.
They're only in government because Berlusconi couldn't find support
elsewhere.
But Italy's ejection from the euro shouldn't be dismissed. Edward Hugh's
covering events in some detail here:
http://fistfulofeuros.net/archives/001484.php and elsewhere on Fistful.
> If Italy went back to the
> Lira, it would just sink even faster.
>
> The sad story of Fiat cars says it all.
>
> >Few, if any, think that the euro will stop being the legal currency of
much
> >of Europe, but with French and Dutch voters having stunned the political
> >establishment by voting against the proposed European constitution, those
> >who are opposed to other European institutions have been emboldened.
> >
> >"It is just inconceivable that a country could envisage dropping out of
the
> >euro," said Jean-Claude Juncker, prime minister of Luxembourg and the
> >current president of the European Union. "The euro belongs to us all."
> >
> >Hans Eichel, the German finance minister, said the very idea of a country
> >withdrawing was "nonsense," and Pedro Solbes, the Spanish economy
minister,
> >called the common currency "irreversible."
> >
> >In Strasbourg, the new French foreign minister, Philippe Douste-Blazy,
> >called the euro "a plus for today's European economies" and recalled the
> >days before the currencies were unified, when interest rates in much of
> >Europe were considerably higher than they are now, raising the cost of
> >borrowing for European companies and governments.
>
> Prompting the obvious question: If interest rates today are lower than
> before, why doesn't each economy take advantage of that fact and get
> off its ass?
>
> [snip]
>
> --
> "I have a horrible feeling that we are sinking into a police state"
> George Churchill-Coleman, former head Scotland Yard's anti-terrorist
squad.
DVH
> On Wed, 8 Jun 2005 19:52:07 +0000 (UTC), "DVH" <d...@dddvvvvhhhhh.com>
> How about the other major Italian problems I mentioned above...and
> the fact that it's the worst performing economy of the five majors?
Can't argue with the figures. Debt, deficit and unemployment all high...
But Italy seems to be different to France and Germany because it hasn't been
investing at the same rate. I'm not sure where the money's going but it's
not being spent on research or capital investment and so companies are
selling crap compared to the rest of Europe. Nobody wants what they make
because they can get it cheaper from Poland or China. I think the SME
model - family firms - has been trying to consolidate but can't, I suppose
because there's not enough capital around and the banking structure is
outdated. It's sad really, because the whole system worked tremendously
well for so many years, and now it's stopped working. Ironic too,
considering Berlusconi's platform was as a champion of business.
>
> >Anyway, the people calling for the referendum might be cabinet ministers,
> >but they're also nutters from the Lega Nord - Bossi's separatist party.
> >They're only in government because Berlusconi couldn't find support
> >elsewhere.
>
> Indeed I mentioned this but then dumped it when I got bored with
> Heinrich's long post :-(
>
> >But Italy's ejection from the euro shouldn't be dismissed. Edward Hugh's
> >covering events in some detail here:
> >http://fistfulofeuros.net/archives/001484.php and elsewhere on Fistful.
>
> See my comments below posted earlier.
> I don't discount the euro collapsing at some time if member states
> can't get their economies out of sluggishness and want a whipping boy
> to blame but lest's not kid ourselves it would be a major upheaval for
> those concerned and Britain too I suspect. It would be a desparate
> last resort.
Maybe the initial scare's worn off now. Eric Chaney puts the talk down to
politics, and says "Obviously, the political space has its own laws, which
are not necessarily the same as the economic space". But I think he
minimises that the euro was a political project, a currency made by politics
and perfectly undo-able by politics.
>
> I make those comments without being pro or anti the euro.
>
> Moreover, if the euro was withdrawn, it would not solve the economic
> problems of the EU or Italy. The problem is not the currency, it's the
> economic model they are following coupled to social conservatism and
> ageing populations.
Yes, but I'd add the ECB to the list of things that are wrong.
> Instead of dealing with the economic problems for
> many years, Italian govts have plastered over the cracks. Now the
> rubber is hitting the tarmac - fortunately not Alitalia's!