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Analysis

Italy crisis reason to stay in EU, not a reason to quit

by Hugo Dixon | 29.05.2018

Brexiters are cock-a-hoop about the full-blown political crisis in Italy. They claim it means the end of the euro and rams home how right the UK was to vote to quit the bloc. Whether or not the Brexiters are right on the first point – and the death of the euro has been falsely predicted many times before, especially during the Greek crisis – they are wrong on the last one.

In watching this unfolding crisis, Brits need to remember one vital fact: the UK is not a member of the euro. When the single currency was set up, we secured an opt-out. Any arguments used against the euro are therefore irrelevant to our membership of the EU, including membership of its single market, trade policy, and cooperation in fighting terrorism and standing up to Vladimir Putin.

Italy’s populist leaders are calling for street protests and preparing for new elections after the president rejected their choice of a eurosceptic as economy minister. Sergio Mattarella argued that if the populist 5-Star Movement and the far-right League wanted Italy to quit the euro, they should debate it seriously. The two parties didn’t openly call for leaving the single currency during March’s inconclusive elections.

A technocratic government has now been appointed and the country is likely to head back to the polls as soon as September. Meanwhile, investors have sold Italian bonds and shares.

Whether the president was wise to veto a eurosceptic economy minister given that the populists didn’t campaign to quit the euro is debatable. His action may smoke out the their views on the euro, losing them support with voters. On the other hand, it could play into their hands.

In the most extreme scenario, the 5-Star Movement/League could win new elections, take Italy out of the euro and provoke a financial crisis that eventually brings the whole single currency tumbling down. This is what hardline Brexiters want.

But would that really be in our interest? Such chaos would damage our economy too, as the euro zone is our most important trading partner. The ensuing maelstrom would also damage us geopolitically, as we struggled to make common cause with our European neighbours on matters of mutual interest.

What’s more, we would be impotent bystanders. If the Italian crisis spins out of control, it would be far better to be at the table helping to manage the fallout and to reinforce those parts of the EU that work well, in particular the single market.

4 Responses to “Italy crisis reason to stay in EU, not a reason to quit”

  • “Italy crisis reason to stay in EU, not a reason to quit”

    It is a huge blow to Remain. It is, however, a huge PR win for Brexiteers and one that has the potential to run all the way through to March 29.

    In watching this crisis it is important to remember several important facts:

    1. Italy is a founding member.
    2. Italy is far bigger than Greece.
    3. Spain is also in crisis.

    As non-Euro members we would more than likely be impotent bystanders anyway, just like we were on Greece.

    Brexiteers will undoubtedly be celebrating because with this crisis, the Spanish crisis, the upcoming rows over the EU budget, the dust-ups between Budapest/Warsaw and Brussels, and the prospect of another Summer of chaos in the Med as two of the most heavily affected countries descend into governmental chaos there will be more than enough negativity to drown out the economic bad news related to Brexit.

  • If Brexiteers think the Italians are about to leave the EU they will be disappointed (as they always are) because they think other Europeans share the same perspective as they do. Some Italians may blame the EU for their problems, but neither they nor the Greeks are insular people, and both consider themselves European. They realise that they are part of Europe and therefore always dependant on what is happening around them.

    The Italians economic problems won’t either be solved by leaving the EU. The EU are helping them to manage their national finances (their national debt is running at 130% of GDP), just as the IMF did in our case under the Wilson government back in the 60s. Obviously voting in parties who at the same time want to lower taxes and increase state benefits, is not helping to solve their problem, but leaving the EU would make matters worse. The EU is their main export market. Also lots of Italians use freedom of movement to send funds back home.