TO LOSE Greece or Portugal may be regarded as a misfortune; to lose Italy looks like carelessness. It is hard to imagine the single currency surviving a showdown with Italy, the currency club’s third-biggest economy (and the world’s eighth-biggest, just ahead of Brazil). Perhaps that explains the recent pugnacity of Matteo Renzi, Italy’s prime minister, regarding European fiscal rules. In an article published in the Guardian newspaper in mid-January, he sounded positively Greek, complaining that the European Union’s “fixation on austerity is actually destroying growth”. His finance minister, Pier Carlo Padoan, has been tangling with the European Commission over how to deal with the €350 billion ($382 billion) of bad loans clogging up the Italian banking system. Mr Renzi is demanding the Eurocrats’ forbearance as he tries to restart Italy’s long-stalled economy.
Italy’s experience within the euro zone has been miserable. It has been in recession for five of the past eight years. Real (ie, adjusted for inflation) GDP per person is lower than in 1999. Sovereign debt has risen above 130% of GDP. Worse,...Continue reading
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