When will Italy leave the Eurozone?

  • Mortens Hansens
  • 30.07.2018.
Ilustratīvs attēls no pixabay.com

Ilustratīvs attēls no pixabay.com

Well, perhaps never but the country should not have joined in the first place; a view that provides strong lessons for Latvia.

This summer I visited VW’s Autostadt in Wolfsburg and saw, among many other cars, a beautiful Lancia Lambda from 1924. Price at that time: 35,000 lire. When Italy joined the Eurozone in 1999 the conversion rate for the lira was 1932 to the euro or about 18 of today’s euro for that fine car. A simple example of Italy as a perennial high-inflation country, which had to resort time and again to currency devaluation to maintain competitiveness.

In the Eurozone currency devaluation is by definition impossible so countries should only join if they obey inflation discipline – but some countries so obviously joined with a rather relaxed attitude towards the importance of cost and price competitiveness and they are now paying a hefty price for the mistake of joining the euro. Some graphs and data should illustrate this.

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