9728 time for a new economic policy?

I'm not sure why you think a lower currency would create more money. Higher tax receipts ?

If they go back to the Lira.

1) All the debt issued in Euros would need to be repaid in Euros. No idea what happened to the old debt when they converted to the Euro.

2) Interest rates would soar. Which would mean problems for everybody from home owners to the government.

3) They would still have a high debt to GDP percentage.

4) Imports would soar in prices.

5) It would cost serious money for everybody to switch back. Plus it would add friction costs for anybody doing cross border trade.

What they need is to get with the French and push for the ECB mandate to be broadened. You could argue they need to start veteoing new Euro and EU countries.

Where did you read this tosh? What was the date on the article? If I were you, I'd continue my studies in the belief that Italy will remain in the Eurozone.

Great points. I should have mentioned this in my previous post but I figured that since Germany was also considering leaving the euro ( as mentioned in the article), others would likely follow in panic. Italy could wait for the value of the euro to drop as a result of others leaving the currency.

As far as the cost of imports, this is very true, but i think that in the long run the country would be better off because of the increase in exports.

Interest rates are something else i completely failed to think about, so that alone is a huge setback unless the government uses revenue from the increase in exports to subsidize business growth with lower interest loans.

Based on your reply, I think that Italy would have to hope that other less debt ridden nations will leave the euro and cause a panic. This will cause the currency to decrease in value and afford italy to pay their loans issued with the damaged Euro in my scenerio.

Very well refuted. I love being proven wrong by someone who can do so thouroughly as you have done. It helps me learn in the end. Thanks. btw I will put a link to the article first chance i get. I should have put it up when i wrote my original post. My mistake, sorry for the lack of citation. It will come though.

I found this piece quite interesting (even though I don't agree with its conclusion).
[url=http://www.independent.co.uk/opinion/commentators/sean-ogrady-the-euro-answered-a-question-we-didnt-ask-838928.html]Sean O'Grady: The euro answered a question we didn't ask - Commentators, Opinion - The Independent[/url]

this one [url=http://www.guardian.co.uk/business/2008/jun/01/economics.economicgrowth1]If the eurozone is on fire, will the ECB get burnt? | Business | The Observer[/url] is more pertinent and makes better sense - and I particularly like its lovely acronym for the spendthrift southern states of Portugal, Italy, Spain and Greece.

Italybound - you should make us aware of (assuming it is available online: if not, where it appeared in print) the publication in which you read this article. Maybe it is one of the links Pigro has referred to - but without the source it is difficult to comment (or on my part, to disparage more effectively!) So - arm your enemies....be bold.

[quote=Charles Phillips;91033]Maybe it is one of the links Pigro has referred to[/quote]
very much doubt it - the ones I linked to are just general 10th birthday puff pieces, and neither really major on Italybound's theme. I do however think that there may be attempts to reopen the lira debate in Italy if (when?) economc recession bites and Berlusconi needs to 'rabble rouse'.

Oh dear, I have just read Pigro's links, and I'm pleased to still count him a friend since he has distanced himself from the complete rubbish penned by Sean O'Grady - (a columnist who moves solid chronological facts into a delinquent forum clock scenario). OMG.

The Observer article is less culpable, but it is wishy washy what if stuff. Both articles come from the assumption that all Europeans saddle themselves with UK type mortgages (no doubt both of the journos who authored this stuff are well in hock) but this is not true (certainly not of Italy). I'm not assuring holders of azioni in Italian banks that they are riding high - but (and this is against my inner instincts) - sometimes the evil alliance of Communism and Catholicism and protectionism does seem to come up trumps, despite itself.

Funny thing is, it seems that only the Brits have taken notice of the 'ten year anniversary' of the Euro: it isn't even that. It is ten years since (Euro entry) currencies were fixed. We were using Lire until (come on someone!) at least year 2000.

[quote=Charles Phillips;91036]
Funny thing is, it seems that only the Brits have taken notice of the 'ten year anniversary' of the Euro: it isn't even that. It is ten years since (Euro entry) currencies were fixed. We were using Lire until (come on someone!) at least year 2000.[/quote]
well, you know, if you didn't get an invite to the party, it's difficult to remember the anniversary :-)

ps. beat you to it by branding both as puff pieces - though the guardian article is IMO quite fair and doesn't (on my reading of it) depend on personal mortgage debt to back it up.

pps. got v. confused there for a mo' - what bright spark at the Guardian decided to name that column 'The Observer' - when you quoted that, I thught I'd linked to the wrong newspaper :-)

Germans may be the only ones who really like the Euro at the moment. It was a few years back when their economy was hurting and the ECB was doing the "We only care about inflation" bit that they weren't happy.

I still say the ECB is pushing the Eurozone into a serious recession. I can understand the rationale for this but I think they're nuts. :eeeek: It won't solve the inflation issues. So all that leaves is the political angle and I don't see how/why the unelected ECB gets to make those choices.

what do you all think of this article? [url=http://www.annoticoreport.com/2008/06/is-italy-flirting-with-fascism-quick.html]The Annotico Report: Is Italy Flirting with Fascism? Quick Answer ??? NO !!!!![/url]

I don't know how accurate this article is to the situation in Italy, but if it is true than i think you guys have a very good asset in the fact that the majority of businesses in the country are not corporate. This gives the people a stranglehold over the economy ideally, and has the potential to hold the government accountable to the taxpayers in my view.

From what i have read, Italian businesses are accountable to over 20,000 different laws that serve to limit growth and expansion. If this is true, can this be a big reason why the economy is suffering? I so very much hope that the country does not adopt the corporate mentality that the United States has. Your small coffee shops and stores are what make Italy so unique and is something that should be aspired to. I eagerly await your collective thoughts. Hope everyone is doing well.

while this is not the specific artticle i was originally referring to, it pretty much says the same thing, and it agrees with my argument as a whole. [url=http://www.timesonline.co.uk/tol/news/world/europe/article531417.ece]Could Italy be first to ditch euro and bring back its old currency? - Times Online[/url]

It mentions that Germany (whom i mentioned as also wanting to leave the euro) is breaking even since going to the new currency, and so in my opinion, it would be in their best interest to leave the euro before they start losig money (assuming they were better off with the mark.

Thankyou all for your constructive criticism and insights. i never have nor will i ever claim to know everything or to have all the answers. I just put my ideas on the table and see what happens.

That article is from 2005.

[quote=iTALY BOUND;91006]I had read in an article that Italy was considering pulling out of the euro and returning to the lira. I think this would be a good idea because it would allow the government to have more control of its money in such areas as setting interest rates, issuing government bonds ect. I very much hope that the government will consider this knowing that the country is faced with a deficit that is equal to 106% of the nation's gross domestic product. I think that if they do this, they can devalue their currency, which will encourage more exports, and the government could then use this extra money to invest in the manufacturing sector, alternate energy sources, paying down the national debt, and anything else that is needed. These are just my thoughts. What does everyone think of this idea?

Being a student of economics here in the US, I hope i can get some feedback on my solution to this problem. please note that i do not claim to have all the answers to everything that ails this country, i love putting out my ideas though; who knows maybe i will get something right. thanks for reading everyone.[/quote]

No,i don't know where you read this but it is not the case neither will it (ever)happen.Neither Germany nor Italy will or would leave the Euro,which BTW probably saved this country from a collapse which would have been similar to that which happened in Argentina.It is also rather naive from an economic pointy of view to even imagine that "playing" with devaluation would actually improve the disasterous economic situation in which the country finds itself even though this was "common tactics" adopted by Italy in the past.No, the country has to face it's own structural problems ( public employment,school/education/research,public expenditure,liberalisation of the economy,infrastructure, public debt etc) within the framework of the parameters set out by the EU and the central european bank and from within the Euro.The Euro has now been in place for over six years...these comments generally come from extreme fringe political quarters and/or the uninformed but do in no way represent any possible policy change in Euroland.

As Noma has pointed out, that article dates from 2005, 3 years after the legacy currencies disappeared. At that time, particularly in Italy and Germany (for reasons which I will make a suggestion about), the populace perceived a very much higher rate of inflation than the governments were admitting to, and it was causing a bit of a political rumpus. Hnce the odd politico jumped on the anti Euro wagon. It had nothing to do with economic policy, but was purely about populist politcs.

There is no doubt in my mind that (particularly) food, professional service fees, and building costs, basically doubled in Italy during the two years after the Euro was introduced. The Euro was fixed at very close to 2,000 Lire, and very close to 2 Deutschmark.

(Now this was almost exactly the sort of 'shoppers exchange rate' which happened when the UK swapped to a decimal currency in 1971, exacerbating domestic UK inflation at that time.)

In Germany and in Italy, something which had cost 1 DM very quickly cost 1 Euro, something which cost 1000 Lire very quickly cost 1 Euro - effectively an inflation rate of 100%. It is interesting that during this period the Spanish and the French didn't experience such a great inflation of everyday prices, their legacy currencies couldn't crediby turn into Euros on the simple basis of two for one.

It isn't, of course, the whole story (the reunifictation of Germany to mention just one big influence was still having a big effect on both the German and the European economies), but you can see why the man in the street was more than delighted to hear some candidate telling him he could have his Lire back (which he couldn't, as Sebastiano clearly explains).

Price hikes were part of the Euros goals so to speak. Before the Euro people living in border areas would have found it a hassle to compare and shop. The Euro made it easier to drive across the map line. It also made it easier for shops and other business to source from around the Euro zone. Both led to prices climbing for low price areas. They should have dropped for higher priced areas. Think about it. If you were a farmer/factory owner and could sell you goods for more money why wouldn't you?

A hundred years ago exchange rates were pretty simple - £1 was worth $5 and 20 of pretty much every currency in Europe.
When the euro was introduced for £1 there were about 10 Francs, 2 Swissy and some 3,000 Lire. Italian savers (so anyone who wanted to accumulate pensions, or put money aside for college fees or a rainy day) had their savings stolen, consistently and persistently by just about every government in Italy.
No wonder most savings went to Switzerland and the level of financial knowledge in the country remains woefully inept.
I remember being here in the 70's when you often received change as sweets or smokes, because it was cheaper for the Japanese to hoover up Italian change to use for the backs of watches than it was to stamp new metal parts!

It is easy to hide behind devaluations. The better solution for the majority is liberalising the economy, but that is a much braver course of action.