Like what you've read?

On Line Opinion is the only Australian site where you get all sides of the story. We don't
charge, but we need your support. Here�s how you can help.

  • Advertise

    We have a monthly audience of 70,000 and advertising packages from $200 a month.

  • Volunteer

    We always need commissioning editors and sub-editors.

  • Contribute

    Got something to say? Submit an essay.

 The National Forum   Donate   Your Account   On Line Opinion   Forum   Blogs   Polling   About   
On Line Opinion logo ON LINE OPINION - Australia's e-journal of social and political debate


On Line Opinion is a not-for-profit publication and relies on the generosity of its sponsors, editors and contributors. If you would like to help, contact us.


RSS 2.0

Italy will Kill the Euro - Not Spain or Portugal

By Sam Vaknin - posted Tuesday, 4 January 2011

Berlusconi's restive and anti-European coalition partners are mulling a contingency plan to pull out of the eurozone and reinstate the lire. Italy is in worse shape than most members of the European Union (EU): at 6% of GDP, it has an ostensibly sustainable budget deficit, but its external debt (now close to 120% of GDP) is higher than that of the most egregious wastrels in the bloc, Greece and Ireland included. Italy's banking sector is over-exposed to borrowers in Central and Eastern Europe, a region habitually pendulating between recovery and economic calamity. If Italy goes Greece's and Ireland's way, the EU and the International Monetary Fund (IMF) - already over-extended by serial bailouts - will be unable to stem the red tide. Italy may actually effectively default even before Spain and Portugal do.

Reverting to its erstwhile and much-abused currency will allow the cash-strapped country to print money to meet its budgetary demands without the shackles and constraints imposed by membership in the club of 16 rich European economies that have adopted the euro as their currency in 2002. Italy cannot levy additional taxes on its faltering economy and would rather minimize its borrowing abroad, the yield on its bonds having soared together with the other PIIGS (the five eurozone members afflicted with systemic risk). Its only remaining option is to monetize its financing requirements by printing money and to erode its public debt by reinflating its economy.


If Italy pulls out of the eurozone, it would spell the end of the euro for all intents and purposes.

What went wrong with Greece and Ireland? More specifically, where did the euro go awry?

I. The History of Monetary Unions

"Before long, all Europe, save England, will have one money". This was written by William Bagehot, the Editor of "The Economist", the renowned British magazine, 120 years ago when Britain, even then, was heatedly debating whether to adopt a single European Currency or not.

A century later, the euro is finally here (though without British participation). Having braved numerous doomsayers and Cassandras, the currency - though much depreciated against the dollar and reviled in certain quarters (especially in Britain) - is now in use in both the eurozone and in eastern and southeastern Europe (the Balkan). In most countries in transition, it has already replaced its much sought-after predecessor, the Deutschmark. The euro still feels like a novelty - but it is not. It was preceded by quite a few monetary unions in both Europe and outside it.


What lessons does history teach us? What pitfalls should we avoid and what features should we embrace?

People felt the need to create a uniform medium of exchange as early as in Ancient Greece and Medieval Europe. Those proto-unions did not have a central monetary authority or monetary policy, yet they functioned surprisingly well in the uncomplicated economies of the time.

The first truly modern example would be the monetary union of Colonial New England.

  1. Pages:
  2. Page 1
  3. 2
  4. 3
  5. 4
  6. 5
  7. 6
  8. All

Discuss in our Forums

See what other readers are saying about this article!

Click here to read & post comments.

4 posts so far.

Share this:
reddit this reddit thisbookmark with Del.icio.usdigg thisseed newsvineSeed NewsvineStumbleUpon StumbleUponsubmit to propellerkwoff it

About the Author

Sam Vaknin ( ) is the author of Malignant Self Love - Narcissism Revisited and After the Rain - How the West Lost the East as well as many other books and ebooks about topics in psychology, relationships, philosophy, economics, and international affairs. He served as a columnist for Central Europe Review, Global Politician, PopMatters, eBookWeb , and Bellaonline, and as a United Press International (UPI) Senior Business Correspondent. He was the editor of mental health and Central East Europe categories in The Open Directory and Suite101. Visit Sam's Web site at

Other articles by this Author

All articles by Sam Vaknin

Creative Commons LicenseThis work is licensed under a Creative Commons License.

Photo of Sam Vaknin
Article Tools
Comment 4 comments
Print Printable version
Subscribe Subscribe
Email Email a friend

About Us Search Discuss Feedback Legals Privacy