‘We’re watching Italy very closely,” said Pierre Moscovici last week, the European commissioner for economic and financial affairs. “We could again have problems with Italy.”
Moscovici’s words were barely reported by the UK media. We’re so obsessed with the roller coaster of Westminster fear and loathing, the same stale personalities droning on, that we miss the big economic picture.
That big economic picture, believe it or not, has Italy centre stage.
Last year, Rome struck a deal with the European Commission to cut its headline 2019 fiscal deficit from 2.4pc to 2pc. This calmed financial markets, which had pushed the spread between Italian and German 10-year government bond yields to over 300 basis points (three percentage points).
At the height of the 2011 single currency crisis, this same spread – which signals investors’ concerns the euro might implode – went above 500 basis points. During the previous decade, it was negligible – effectively zero. The conventional wisdom was that, within the shiny new eurozone, the Rome government was just as creditworthy as that in Berlin.
This has been exposed as the nonsense it always was. The single currency could easily fold – anyone denying that is economically and politically illiterate.
Rich, more productive eurozone nations are sick of providing bailouts and their poorer, profligate neighbours are sick of taking orders from Brussels.
The big economic picture is that the EU accounts for just 15pc of global GDP, down from 40pc when we joined in the early Seventies. Hiding behind a tariff wall that discriminates against the 85pc of the world economy driving the vast bulk of future growth is crazy. Doing so with no say over trade policy, and when the eurozone faces collapse, is crazier still.
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