The Eurozone may soon begin to break apart after Italy’s government revived plans for an “alternative currency” to the euro after EU chiefs attacked the country over its rising debt.
Several key players in the populist League party of Deputy Prime Minister Matteo Salvini has floated the possibility of a of a new domestic currency to help pay its debts after the EU said that Italy must soon pay a fine of over three billion euro for failing to keep its debt under acceptable levels.
The EU Commission issued a statement saying
“Italy’s large public debt is a major vulnerability for the Italian economy and decisively reducing it should remain a priority in the best interest of Italy.
Italy’s public debt-to-GDP ratio, at 132.2 percent in 2018, is the second-largest in the union and one of the largest in the world.”
As a member of the Eurozone Italy cannot print its own currency and therefore cannot engage in quantitative easing or utilise its central bank to increase competitiveness in terms of exports. The Euro which is generally set at a rate to benefit the export driven economy of Germany has been catastrophic for countries such as Italy and Greece whose economies are primarily driven by domestic demand.
Being a part of the euro also makes austerity inevitable as this is the only that countries can increase competitiveness something that has caused consternation in Italy and other EU states.
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