Don’t Blame The Euro

Who’s he kidding? Maroni’s nostalgia for the lira is little more than a transparent-- and irresponsible-- election ploy by Italy’s Northern League, an attempt to divert blame for the country’s present economic troubles onto Romano Prodi, former EU Commission president and center left candidate in the forthcoming general elections. A return to the lira would be “economic suicide” for Italy according to ECB chief economist Otmar Issing.

The euro has made Italian government bonds as good as German government bonds, because the ECB is willing to accept both on an equal basis as collateral for ECB loans. This has dramatically reduced the cost of borrowing for the Italian government. Has the Italian minister thought for a minute how his government would pay for all its public spending on welfare, and other items, if Italy’s interest rates no longer were subsidized by the ECB?

Perhaps Maroni wants to go back to the lira so that Italy can de-value it. This suggests an important advantage of the euro for Germany, where misplaced nostalgia for the deutsche mark -- no doubt aided by the steady invective against the common currency by government officials -- is growing. The euro stops countries like France and Italy from playing their old protectionist game of devaluing their currencies at German expense.

To continue reading, please log in or enter your email address.

To access our archive, please log in or register now and read two articles from our archive every month for free. For unlimited access to our archive, as well as to the unrivaled analysis of PS On Point, subscribe now.


By proceeding, you agree to our Terms of Service and Privacy Policy, which describes the personal data we collect and how we use it.

Log in;

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated cookie policy and privacy policy.