Sunday 26 May 2019

Once-sceptical Germans embrace euro as Italians grow doubtful

Alastair Macdonald and Francesco Guarascio

Italians used to love the euro. Now they are not so sure. The prospect of populist parties taking over the government has spooked investors fearful that Italy might quit the monetary union.

Italy's euro membership "was never debated" in talks on forming a government between the Five Star Movement and League earlier this month, former premier-designate Giuseppe Conte said in a video interview posted yesterday on the website of the 'Corriere della Sera' newspaper.

But, markets were spooked this week at the prospect a eurosceptic candidate to become finance minister was planning exactly that.

Last night Italy's populist Five Star Movement and League parties reached agreement on a government team, paving the way for them to take power with a programme for fiscal expansion that sets them on a collision course with EU fiscal rules.

Luigi Di Maio of the anti-establishment Five Star Movement and Matteo Salvini of the anti-immigrant League said they will propose law professor Giuseppe Conte (53), who has no political experience, as prime minister.

Economist Giovanni Tria is the candidate for the job of finance minister, according to party officials who declined to be named.

The accord sees Tria (69), as finance minister, with eurosceptic economist Paolo Savona (81) taking up the European affairs portfolio instead. Exiting the single currency is not explicitly on the agenda.

Italian's relationship with the euro is a tale of a romance gone sour over two decades of monotony, as Italy's economy has stagnated since it ditched the ever-devaluing lira for the EU's newly minted common currency. Germans who were initially reluctant to give up their beloved Deutschmark have warmed to the now 19-nation currency, as their economy powered forward since it was introduced in 1999.

The European Commission has been tracking support across the EU for the euro in its Eurobarometer survey since the 1990s while its Eurostat statistics agency collates economic data.

In 2000, with the euro a year old in bank accounts but still not in Europeans' pockets as notes and coins, four Italians in five - 81pc - thought it a good idea while only 50pc of Germans were in favour.

The French were somewhat middling, with two-thirds of them seeing mainly benefits from giving up the franc.

Fast forward to today, and there is a dramatic turnaround. Italy's national income has grown in real terms by just 3pc since 2000. Germans were fully 24pc better off last year compared to 17 years earlier, the French 22pc.

Over the same period, Italians' support for the euro has plunged, to 59pc in the last Eurobarometer survey, in November. That was up from lows of 53pc in 2012-13, at the height of the debt crises, and again in 2016 after Greece's bankruptcy and an EU crisis over Mediterranean migrants rocked Italy. Conversely, while French support is broadly steady, German backing for the euro has hit 80pc, climbing steadily since its early days, when the reunited Germany's economy was for a time Europe's "sick man". That, say some critics, is because Berlin has pressured the EU to run the euro for German benefit.

As this week's political crisis brought the issue back to the fore however two private polls yesterday found that 60pc to 72pc of Italians would prefer to keep the euro. (Reuters)

Irish Independent

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