- 2018-09-27
Will Italy Brexit?
Nearly a decade after the prolonged Greek debt crisis disturbed the global market, a new round of political turmoil in Italy has once again raised concerns about the fate of the European financial system and the euro. This time, Italy's debt crisis is even worse than Greece's ten years ago. A populist Italian government may hold a referendum on exiting the euro zone, restoring the Italian lira (lira), or even leaving the European Union in the footsteps of the United Kingdom. This has also made many bankers and investors uneasy.
“Italy’s economy is 10 times that of Greece, and its debt crisis has shaken the foundations of the Eurozone,” said Desmond Lachman, a permanent research institute of the American Enterprise Institute, in a recent report. Wrote in a blog post. "If Italy is forced to withdraw from this currency system, the euro is unlikely to exist in its current form."
On May 29, European time, due to concerns about political turmoil in Italy, global stock markets plummeted, and the euro fell to its lowest level against the US dollar in six months.
Since the Great Depression, Italy's economy has been struggling, and its heavy debt burden is even several times that of Greece. In fact, Italy’s debt crisis has become a major factor in current political instability, because many governments have failed to resolve the country’s debt problems.
According to the projections of the US Central Intelligence Agency from 2016 to 2017, several relatively large debtor countries in the world include the United States, the United Kingdom, Germany, Luxembourg, etc., of which Greece’s debt is US$507 billion, while Italy’s debt is as high as US$2.4 trillion.
At the end of May, a new round of political crisis broke out in Italy. Even with the establishment of an interim government, Interim Prime Minister Carlo Cottarelli failed to win enough support from the major political parties. Since March, Italy has been trying to form a new government. The recent stalemate may force President Sergio Mattarella (Sergio Mattarella) to return to Parliament in the next few days, allowing Italians to vote as early as July 29.
On May 29, the Bank of Italy warned that due to fears that the new election may become Italy's quasi-Brexit referendum, the financial market has experienced the worst selling wave in years, and Italy is about to lose the trust of investors. If Italy also holds a referendum on Brexit similar to the United Kingdom, it may bring a fatal blow to the European Union that has been established for 25 years.
The political deadlock in Italy intensified after the national elections in March. At that time, the two major populist parties, the anti-establishment Five-Star Movement Party and the anti-immigrant Northern Alliance Party, became the biggest winners. Some political analysts believe that the latest stalemate that emerged last weekend may strengthen the positions of these populist parties, which further deepens people's doubts about Italy's continued presence in the European Union and the Eurozone.
"Italy will be caught in a protracted debate. During this period, there will be fierce anti-system and Euroscepticism." Political analyst Wolfango Piccoli (Wolfango Piccoli) said in an interview with the Associated Press.
Even if the populist parties did not explicitly call for Italy to withdraw from the euro zone, their strength has exacerbated the political differences between Italian and EU officials. As political differences intensify, this will make Italy's heavy debt burden more complicated.
EU officials also promised to respect the right of Italian voters to choose their own government. Earlier, the European Commissioner in Germany stated that Italian voters should not vote for populist parties.
These comments provoked anti-EU and anti-German reactions in Italy. In the upcoming elections, this may provide stronger support for populist parties.
So why is everyone in Italy talking about the euro nowadays? In fact, since Italy started using the euro in 2002, Italians have been talking about the euro. For years, Italians have been complaining-since the use of the euro, their spending power has declined. But the populists who performed well in this election also said that the membership of the euro zone has subverted Italy’s sovereignty, and this is also the focus of Italy’s current concerns.
Before Italy started using the euro, Italy could reduce or raise interest rates to affect the value of its currency and its own economic competitiveness. However, under the euro system, Italy, like all so-called euro member states, cannot control the interest rate set by the European Central Bank.
The Five Star Movement Party and the Northern Alliance Party, which won the election on March 4 this year, have already expressed hostility to the 28 member states of the European Union and 19 member states of the euro zone. Then the two parties tried to unite to form a government. But Italian President Mattarella opposed Paolo Savona, the economic minister chosen by the two parties. What needs to be pointed out is that Savona was the co-author of a guide book on exiting the Eurozone.
Mattarella believes that if Italy really wants to withdraw from the euro zone, then more public discussions are needed. Therefore, attempts by the two parties to form a government also ended in failure. Now Italy may hold new elections as soon as July 29th. The new elections will not only affect the euro, but also Italy's membership in the European Union.
The euro did not plummet when Greece threatened to withdraw from the euro zone. So why is Italy's possible exit from the Eurozone this time so much attention?
The New York Times reported that this is because Italy is one of the founding members of the Eurozone and one of the largest economies in Europe (ranked fourth only after Germany, the United Kingdom and France). Italy's launch of the euro zone may cause severe global economic turmoil and undermine investor confidence in Italy and Europe as a whole. In addition, interest rates may also soar on a global scale.
What's more, Italians don't necessarily really want to withdraw from the Eurozone or even the European Union. Italians’ perceptions of the euro’s superiority have diminished, and their perceptions of the European Union are also different. But many Italians are very dissatisfied with EU authorities' interference in Italy's internal affairs in Brussels. On the other hand, the euro performs better in Italian public opinion, partly because the euro has brought economic convenience to Italians.
"The euro suits Italy. Italians are not happy, but that doesn't mean they want to exit the euro zone," Maurizio Pessato, president of polling firm SWG, said in an interview with The New York Times.