ITALY WILL quit the eurozone if the standard of living does not improve, the head of Germany’s Institute for Economic Research said today.
Ifo chief Clemens Fuest said that he believes Italians will reject the Euro currency and return to the Lira.
He told Germany’s daily newspaper Tagesspiegel: “The standard of living in Italy is at the same level as in 2000. If that does not change, the Italians will at some stage say: ‘We don’t want this euro zone any more’,”
He also said that if Germany’s parliament were to approve a European rescue programme for Italy, it would impose on German taxpayers risks “the size of which it does not know and cannot control.”
He said German lawmakers should not agree to do this.
Italy is not seeking such a rescue programme but the Government in Rome is focusing on underwriting the stability of its banking sector, starting with a bailout of Monte dei Paschi di Siena.
Italy is currently on the verge of an economic crisis after country’s oldest bank required a£4.26bn bailout.
Italian officials recently attacked the European Central Bank (ECB) over its decision to double its estimate of the capital shortfall for the ailing bank Monte dei Paschi di Siena (MPS), which is being bailed out by the state.
The bank, saddled with bad loans, needed to raise £4.2billion (€5bn) by the end of the month to avoid being wound down with the Italian government expected to inject billions to keep the lender afloat.
Italy’s third biggest lender, said the ECB had estimated its capital shortfall at £7.5bn(€8.8bn), compared with a £4.2 (€5bn) gap previously indicated by the bank, provoking a furious reaction from Rome.
Economy minister Pier Carlo Padoan said the ECB should have explained more clearly why it nearly doubled its estimate of the capital shortfall.
Meanwhile Italy is facing increased pressure on migration. Today it announced plans to adopt a tough approach to illegal migrants this year after half a million migrants arrived on its shores in 2016.