EU leaders concerned that Italian plans could bring the eurozone down.
Various sources over the last week report that there is growing concern among leaders in Brussels that a proposed parallel currency in Italy could come into effect and topple the eurozone. This comes as European Union finance ministers agreed to pursue plans to penalise Italy with a fine of more than €3bn. During a meeting earlier this week, the ministers confirmed that Italy’s high debt contravenes EU rules, prompting the European commission to take further steps to punish the country.
The Finance Ministers said that Italy’s public debt stood at 133% of GDP in 2018, more than double the EU’s 60% limit. The BBC reported earlier this week that Italy’s debt had reached €2.6 trillion – equivalent to €43,000 for every Italian. Italy paid €73 billion in interest last year, and is generally regarded by many economists to be in worse financial shape than Greece ever was.
In the past year, Rome has been locked in a bitter battle with Brussels over its controversial budget plans Earlier this month, the Italian Parliament unanimously passed a proposal to look at the creation of “Mini-BOT” (an acronym for Mini Bills of Treasury)- which experts believe would act as a parallel currency to the euro. The New York Times reports on the concern that these propsals are creating here.
The idea, put forward in response to the increasing economic concern in Italy, has been suggested as a way for the Italian government to pay debts, stimulate the Italian economy and give Italians a way to pay their taxes. However, financial experts warn that the mini-BOT could create a parallel currency that will ease Italy out of the eurozone.
The Express reports that Riccardo Puglisi, associate professor of economics at the University of Pavia said “It’s a first step to prepare EurExit, so I think it’s extremely dangerous”, whilst Erik Nielsen, a leading economic analyst from Unicredit, told the Financial Times that the move was a desperate attempt from Italy to deal with its mounting debt. He said: “There is no realistic way of doing a parallel currency inside the eurozone. You cannot produce something that is competitive to the euro. It is illegal.”
However, there is fear among leaders in the EU that Italy would implement the parallel currency if the public row with Brussels continues to escalate. Mario Draghi, the president of the European Central Bank, told reporters last week “They (mini-BOTs) are either money — and then they’re illegal — or they’re debt, and then that stock goes up”. Other leaders have admitted that this currency introduction would threaten to bring the entire eurozone down.