- The Washington Times - Tuesday, June 14, 2005

ROME — Italians, once among the most enthusiastic supporters of a united Europe, are becoming increasingly disillusioned, so much so that some are suggesting that Italy dump the euro and bring back the lira.

Roberto Castelli, the silver-haired Italian justice minister from the Northern League, a major coalition partner in the government of Silvio Berlusconi, said his party will present concrete proposals this week for calling a referendum on ditching the euro.

“Does [the British pound] sterling have no economic foundation because it is outside the euro?” he asked. “Is Denmark living in absolute poverty because it is outside the euro? Are Swedes poor because they are outside the euro?”

Italian discontent with the euro marks the latest crisis to rattle the quest for European unity.

British Prime Minister Tony Blair and French President Jacques Chirac have been locked in a bitter public feud ahead of European budget summit this week and the Continent is reeling from the rejection of a proposed constitution by French and Dutch voters.

A chain of Tuscan supermarkets has been enjoying a surge in business after pledging to accept the lira alongside the euro, cashing in on Italians who blame the single currency for rising prices and a slumping economy.

Polls show that as many as 27 percent of Italians are ready to dump the common European currency. Italy’s minister of economy and finance, Domenico Siniscalco, has bluntly rejected the suggestions.

Mr. Siniscalco insists that “Italy’s currency is the euro,” but Mr. Berlusconi’s Forza Italia party also contains a euro-sceptic wing inspired by counterparts in Britain’s Conservative party suspicious of ceding sovereignty in Brussels.

The “post-Fascist” National Alliance party founded by former admirers of the wartime nationalist dictator, Benito Mussolini, also has traditionally been wary of European integration.

Politicians in Rome have been openly discussing the “exit option” as their country slides deeper into recession.

Italian newspapers report that hedge funds are calling in lawyers to check on legal options if Italy decides to replace the euro with a “new lira” as the currency of denomination for Italian bonds.

Northern League firebrands such as Roberto Calderoli, the minister for social welfare, blame Italy’s left-wing opposition leader, Romano Prodi, for the poor performance of the economy since he was heavily involved in the introduction of the euro as Italian prime minister first and later as European Union Commission president.

Mr. Prodi defended his role and that of Italy’s president, Carlo Azeglio Ciampi in introducing the euro.

“I must tell you I am proud of having taken Italy into the euro, along with the then treasury minister, Carlo Azeglio Ciampi,” Mr. Prodi said. “The euro has given new energy to the country and allowed young people to get a mortgage for their house by lowering interest rates and inflation, and putting Italy back in line.”

Nevertheless, government economists say privately Italy could gain short-term economic benefits from leaving the euro.

By devaluing its currency, Italy could immediately boost exports, jobs and manufacturing investment. The real value of Italy’s massive public debt, equivalent to some 105 percent of gross domestic product, could be slashed by devaluation.

EU leaders are furious about rebellious Italian dissatisfaction with the single currency. “It is just inconceivable that a country could envisage dropping out of the euro,” said Jean-Claude Juncker, the prime minister of postage-stamp-sized Luxembourg, which is currently the revolving European Union president.

The European Central Bank president, Jean-Claude Trichet, said talking about dropping the euro is “complete nonsense.” Economists close to Mr. Prodi believe the best way to combat underconsumption and unemployment, not only in Italy but throughout Europe, would be a bold reduction in interest rates, at least to the emergency level of one percent that revived the U.S. economy in 2003, if not to zero as in Switzerland and Japan.

But with a general election looming in Italy next year, Mr. Berlusconi fears losing the support of the Northern League, which brought his previous government down in 1994 by leaving the center-right coalition.

Mr. Berlusconi has stopped short of contradicting the flamboyant Northern League ministers on the euro, fueling speculation that to retain power he may yet be plotting to precipitate the breakup of the euro, which could herald the death of the European Union.


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