by Could Italy save the euro? In a recent interview … Silvio Berlusconi mooted the introduction of a parallel domestic currency, the so-called mini-bills of Treasury (“mini-BOTs” for short), which would in theory allow Italy to exit austerity without exiting the eurozone. Italy’s Five Star/Lega coalition government has also embraced the idea. The ECB and the European Commission, predictably, oppose the mini-BOT’s introduction, seeing it as an existential threat to the single currency and a means of avoiding the fiscal rules established at its creation … Determining what constitutes legal tender for the settlement of tax liabilities opens up considerably more fiscal policy space for a national government. Hence the appeal to Rome, as their proposed mini-BOT
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Could Italy save the euro?
In a recent interview … Silvio Berlusconi mooted the introduction of a parallel domestic currency, the so-called mini-bills of Treasury (“mini-BOTs” for short), which would in theory allow Italy to exit austerity without exiting the eurozone. Italy’s Five Star/Lega coalition government has also embraced the idea. The ECB and the European Commission, predictably, oppose the mini-BOT’s introduction, seeing it as an existential threat to the single currency and a means of avoiding the fiscal rules established at its creation …
Determining what constitutes legal tender for the settlement of tax liabilities opens up considerably more fiscal policy space for a national government. Hence the appeal to Rome, as their proposed mini-BOT would give Italy’s government more policy options to generate an economic expansion commensurate with higher incomes and more job growth …
The mini-BOT remains highly controversial, both politically and legally. In terms of the latter, many, such as Lorenzo Codogno, a former chief economist at the Italian Treasury, claim that the introduction of a parallel domestic currency would contravene the terms of the European Monetary Union treaty … The real concern is political, a view typified by Riccardo Puglisi, an economist at the University of Pavia. Puglisi sees the mini-BOT not as a complement to the euro, but rather as “a way to facilitate the exit of Italy from the eurozone” …
The “phony war” will end soon. The parallel currency at least offers a fresh approach to reverse Italy’s relative economic decline. However, the European Commission’s reluctance to tolerate any degree of experimentation, its politically tone-deaf browbeating of the Italian government to fall into line with prevailing economic orthodoxy actually feeds the anti-establishment and anti-euro forces now politically ascendant in Italy.
The monetary union has not been able to show any noteworthy productivity jumps since it was launched twenty years ago. The economic problems have been growing and at times almost led to national catastrophes. The EMU is not an optimal currency union, and as history has told us, countries like Germany, Greece, and Italy do not fall into step when marching.
Although data indicate that there may be some weak evidence of convergence in long-term interest rates in the Eurozone, there seems to be very little evidence of convergence when it comes to macroeconomic outcomes such as growth, employment, inflation, or public debt. The magic silver-bullet that would solve all problems, simply has not materialized.
The problems with the euro should not come as a surprise. If a country gives up its own currency, it does not only give up the possibility of having its own over monetary policy. Membership in the European monetary union means less accommodation and flexibility when it comes to country-specific asymmetric shocks, and fewer possibilities for freely using financial policies to guarantee low unemployment and high welfare levels.
The unfolding of the repeated economic crises in euro land has shown beyond any doubts that the euro is not only an economic project but just as much a political one. What the neoliberal revolution during the 1980s and 1990s didn’t manage to accomplish, the euro shall now force on us.
But do the peoples of Europe really want to deprive themselves of economic autonomy, enforce lower wages and slash social welfare at the slightest sign of economic distress? Are increasing income inequality and a federal überstate really the stuff that our dreams are made of? The euro has taken away the possibility for national governments to manage their economies in a meaningful way — and in Italy the people have had to pay the true costs of its concomitant misguided austerity policies.
The euro model is and has always been footed on an economic model that increases inequality and is to the disadvantage of the working classes. Austerity measures are repeatedly imposed and threaten not only our economies but also democracy itself.
How much whipping can economy and democracy take? How many have to be hurt and ruined before we end the euro madness? Instead of just go on mending the project it would be better to just admit that we have reached way’s end and that it is time to take another road. A road forward. A road without the euro.