Weak economy and dire prospects of economic reform could make
Italy give up the euro currency, a key German bank said Friday in a
report.
The costs for Italy to quit the euro single currency at present
far outweigh any potential benefits from lower prices for the
country's exports that a return to the lira would bring, said
Commerz bank in its report to clients.
But the Romano Prodi government's slim majority means it is
unlikely to pass any meaningful market economy reforms, the bank
said.
"From the standpoint of politicians this will gradually raise
the political benefits of leaving the single currency," it noted,
adding "There is thus a small but not to be neglected probability
that Italy will leave the currency union in the coming five
years."
Such a move would throw the entire 12-nation euro-zone into a
"deep crisis" and politically isolate Italy for years to come, the
bank said.
Foreign debts held in euros by both the state and private
industry would rise sharply after an Italian devaluation, the
report said, investors would avoid Italy and interest rates would
climb.
It said that the core problem of Italy is its industrial sector
which has become massively less competitive regarding prices since
the launch of the single currency in 2002.
(Xinhua News Agency November 11, 2006)
