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Italian minister raises questions over membership of eurozone
By Tony Barber in Rome
Published: June 4 2005 03:00 | Last updated: June 4 2005 03:00
Italy's membership of the 12-nation eurozone was put in question yesterday by a government minister who said the country should hold a referendum to bring back the lira.
The remarks of Roberto Maroni, Italy's welfare minister, do not represent government policy, but they underline the risks facing the European Union after voters in both France and the Netherlands rejected the EU's proposed constitutional treaty.
Silvio Berlusconi, Italy's prime minister, who is battling to retain power in a national election due by next May, has blamed Italy's plunge into recession since last October on the euro's high exchange rate against the dollar and on the European Central Bank's monetary policy.
More bad Italian economic data emerged yesterday as a survey by NTC Research showed that activity in Italy's service sector declined in May at the fastest pace in seven and a half years - even while it rose in the eurozone as a whole.
As nervous financial markets digested Mr Maroni's proposal, the interest rate differential between Italian and German 10-year bonds rose to 0.24 percentage points, the widest spread since October 2002.
The spread reflects the interest rate that Italy pays on its gigantic public debt, now standing at 106.6 per cent of gross domestic product, and economists said Italy's exit from the eurozone would be certain to push its debt payments higher.
"Leaving European monetary union would leave Italy with national debt interest payments which would dwarf any advantage from a competitive devaluation," said Julien Seetharamdoo, economist at Capital Economics in London.
Mr Maroni is a prominent politician in the Northern League, which is a junior partner in Mr Berlusconi's centre-right coalition government.
His comments were striking, as they came from a country that generally is a strong advocate of closer European integration.
In an interview with La Repubblica, an Italian daily, Mr Maroni blamed Italy's poor economic performance on the euro and those who introduced it - a jab at Romano Prodi, the former European Commission president who now leads Italy's centre-left opposition.
"It's been three years now that the euro, not through its own fault but because of those who managed the move to the single currency, has shown that it's not capable of dealing with the slowdown in economic growth, the loss of competitiveness and the employment crisis," Mr Maroni said.
"Isn't it perhaps better to return, temporarily at least, to a system of a dual circulation of currencies [the euro and the lira]? In Europe there is a virtuous example, and it's Britain, which is growing and developing, maintaining its own currency. A cry for help is coming from citizens."
He said he was speaking for the League's northern Italian electorate of small businessmen, shopkeepers and workers - "a world of producers that has built its economic success on small business and on the competitive advantage deriving from devaluation".
Mr Maroni's populist Northern League has often been critical of the EU and was almost alone among Italian political parties in voting against the EU constitutional treaty when it was approved by parliament earlier this year.
http://news.ft.com/cms/s/5801f53a-d4...00e2511c8.html
By Tony Barber in Rome
Published: June 4 2005 03:00 | Last updated: June 4 2005 03:00
Italy's membership of the 12-nation eurozone was put in question yesterday by a government minister who said the country should hold a referendum to bring back the lira.
The remarks of Roberto Maroni, Italy's welfare minister, do not represent government policy, but they underline the risks facing the European Union after voters in both France and the Netherlands rejected the EU's proposed constitutional treaty.
Silvio Berlusconi, Italy's prime minister, who is battling to retain power in a national election due by next May, has blamed Italy's plunge into recession since last October on the euro's high exchange rate against the dollar and on the European Central Bank's monetary policy.
More bad Italian economic data emerged yesterday as a survey by NTC Research showed that activity in Italy's service sector declined in May at the fastest pace in seven and a half years - even while it rose in the eurozone as a whole.
As nervous financial markets digested Mr Maroni's proposal, the interest rate differential between Italian and German 10-year bonds rose to 0.24 percentage points, the widest spread since October 2002.
The spread reflects the interest rate that Italy pays on its gigantic public debt, now standing at 106.6 per cent of gross domestic product, and economists said Italy's exit from the eurozone would be certain to push its debt payments higher.
"Leaving European monetary union would leave Italy with national debt interest payments which would dwarf any advantage from a competitive devaluation," said Julien Seetharamdoo, economist at Capital Economics in London.
Mr Maroni is a prominent politician in the Northern League, which is a junior partner in Mr Berlusconi's centre-right coalition government.
His comments were striking, as they came from a country that generally is a strong advocate of closer European integration.
In an interview with La Repubblica, an Italian daily, Mr Maroni blamed Italy's poor economic performance on the euro and those who introduced it - a jab at Romano Prodi, the former European Commission president who now leads Italy's centre-left opposition.
"It's been three years now that the euro, not through its own fault but because of those who managed the move to the single currency, has shown that it's not capable of dealing with the slowdown in economic growth, the loss of competitiveness and the employment crisis," Mr Maroni said.
"Isn't it perhaps better to return, temporarily at least, to a system of a dual circulation of currencies [the euro and the lira]? In Europe there is a virtuous example, and it's Britain, which is growing and developing, maintaining its own currency. A cry for help is coming from citizens."
He said he was speaking for the League's northern Italian electorate of small businessmen, shopkeepers and workers - "a world of producers that has built its economic success on small business and on the competitive advantage deriving from devaluation".
Mr Maroni's populist Northern League has often been critical of the EU and was almost alone among Italian political parties in voting against the EU constitutional treaty when it was approved by parliament earlier this year.
http://news.ft.com/cms/s/5801f53a-d4...00e2511c8.html
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