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Guntram B. Wolff is director of Economic Science Institute Bruegel Inbrussels.
“Italy once again has a crisis – but whole thing has nothing to do with us”: This is fasteinstimmige tenor of many discussions on dramatic political developments in Italy over past few weeks. But is this Einschätzungdenn correct or does Germany not at least bear a complicity?
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Right: The Italian policy is chaotic and gives cause for concern. Initially, DasRegierungsprogramm saw five-Star Movement and Lega a new GroßesHaushaltsdefizit – estimates go from a budget hole in amount von100 to 125 billion euros – and included clauses that MöglicheEinführung a parallel currency and mechanisms for withdrawal from derWährungsunion.
President Sergio Mattarella stopped formation of government and rejected VorgeschlagenenFinanzminister Paolo Savona because of his euroscepticism. The Finanzmärktereagierten mercilessly: rise in interest rates for Italian Staatsanleihenübertraf all that Italy had seen until n in one day – even during euro crisis 2011 and 2012. The horror of this Finanzmarktreaktionsaß deep. Within just three days a neueRegierung of five-star Bewegungund Lega was used. The controversial Savona will now be minister for European Affairs instead of finance ministers. Wher this is better for European project, Seidahingestellt.
Guntram B. Wolff
Is director of Economic Science Institute Bruegel in Brussels.
The Government of Rome does not seem to think of a euro exit. But new Cabinet Machtdas fundamental problem of eurozone again: DeutscheRegierung and its counterpart in Italy are completely unterschiedlicheVorstellungen about how monetary union should work. The crux of matter is that Germany has a tradition of a hard currency, WährendItalien has always set a soft monetary policy.
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Until before introduction euro, political system of Italy’s domestic distribution problems meistdadurch resolved that state borrowed debt and that high Budgetdefiziteletztlich were financed by depreciation and higher inflation. The now foreseeable rise in Italian deficits is linked to this policy of soft currency. It will inevitably exacerbate conflicts with Germany, Dasstolz to its past of stable and strong mark.
Since beginning of DerWährungsunion, Italy has been under control of its budget deficits as a whole, but debt level has continued to increase over past ten years. Dagleichzeitig economic growth, debt ratio – i.e. total public debt in relation to economic strength – was significantly higher. If re is neir growth nor possibility to allocate money by deficit, exacerbate in such a zero-sum game dieVerteilungsprobleme.
