11612 Should Italy Leave the Euro?

Nigel Hi. You will have to set up two different threads containing the separate polls. Here is a thread that contains Nielo's instructions on setting them up - [url]http://www.italymag.co.uk/forums/general-chat-about-italy/10860-step-step-guide-creating-polls.html[/url]

If Italy leaves the Euro now, it might retain some dignity. The alternative is to hang on till its economy is well and truly up the proverbial and it is thrown out by market turmoil and the other Euro members (probably along with Spain, Greece and maybe Ireland).
The Euro was always a crack-pot idea - never in history has there been a successful currency union without a political union to back it up.

[quote=nigelaxis;110099]One size fits all when the going is good, but in times of trouble? I would like to set-up 2 polls on this thread (if somebody can show me how).

1) Should Italy keep the Euro?
This would allow Italy to devalue it's own currency again and boost its struggling manufacturing sector, but how about instability.

2) Has the EU been good or bad for Italy?
Costs have gone through the roof. Has there been a decrease in the power of the Mafia? But has EU funding built any roads?

Be interesting to see the result of these polls and accompanying comments.[/quote]

No ,i don't think a poll would be very interesting given that there is no debate in Italy
concerning leaving the euro,actually there really isn't a debate as to whether entering the euro was good bad for the country.
ALL economic experts and most political groups and most educated people fully understand that the euro saved italy from what would have been considered an "argentian"fate which would have involved the total collapse of the economy and no amount of devaluation would have saved the currency.One can still discuss ( like on the sex of angels) as to whether a "better" exchange rate could have been negotiated,or as to whether there should have been a 2 euro banknote,or whether certain "commercianti"should have been pulled up for speculation after the introduction of the new currency but that's all history and conjecture now.Of course ,and it was inevitable,the common currency immediately highlighted Italy's atavic weaknesses,it's enormous public debt which requires expensive servicing on the part of taxpayers ,it's infrastructural deficit, etc etc.no one however believes unlike the financial times and some other uk journals when they have nothing more interesting to write about start harping on about the euro and almost auguring it's demise (in favour of sterling?) perhaps the only real issue to have a poll about should be when will the UK enter the euro system?before the chorus of never hits the net it does seem that it is being seriously considered in some circles in the uk.......

Actually, no country has guarded against "an Argentinian fate" by simply sharing the Euro as a currency. Countries borrow money by selling what in the UK are known as Gilts, in the US as Treasury bonds, and commonly (and confusingly) in European countries as Eurobonds.

Now an Italian Eurobond is backed by the Italian government, and a German bond is backed by the German government etc. Neither the interest paid on them, nor the guarantee to return the capital value, has anything whatsoever to do with the European Central Bank.

If the government defaults on this debt, which is what Argentina famously did (actually Italy defaulted on interest payments on its debt as recently as the 1990s) it makes it much more difficult and expensive for them to raise any more money by borrowing. Already the 'dodginess' of Italian bonds in comparison with German bonds is demonstrated by both the amount of interest paid (higher in Italy, reflecting a riskier propositon) and the 'insurance premium' in terms of the CDS rates. The common currency has, in theory, nothing to do with sovereign risk, although it will be interesting to see whether the ECB intervenes if any Eurozone country does appear to be about to default.

Well said Charles Phillips, with the exception of your definition of "Eurobonds".

The term "Eurobond" refers to any bond that is issued in a currency that is not the currency of the country in which it is issued. So a US$ denominated bond issued in London is a Eurobond (Eurodollar) a Yen denominated issued in the US would be a Eurobond (Euroyen) etc. It has nothing to do with the Euro, or even necessarily Europe.

Spreads on Italian Government debt over the more stable German debt are widening, and have been for some time, as is the cost of default protection on Italy (and Spain etc).

The nuclear option for heavily indebted nations is to default on their foreign (or Euro) debt. A "default" by Italy could easily take the form of re-domination into "new" Lira, which of course would be rapidly worthless on the foreign exchange market.

If the ten Euro note in your pocket has a serial number starting with "S", then its Italian - maybe soon to be swaped for 100,000 "new" Lira. Change it as soon as you can for one starting "X" - that's issued by the Bundesbank.

Whether the Euro survives, or certain states survive within it, is a matter of economics - no political grandstanding will hold out against riots brought on by lack of jobs and food.