Eyes on Italy now
Italy’s government debt is currently 130{5e7f07e14add20b2e04f4edb85a447d3cd8121fc27b809645e9fed603c22cc5c} of GDP; youth unemployment is among the highest in the Eurozone, while productivity growth among the lowest. In this article Cecchetti and Schoenholtz ask whether Italy’s current economic situation is the fault of the euro. If the Banca d’Italia had the freedom to engineer a currency depreciation to boost external competitiveness or inflate away the real burden of government debt, would Italy be in a better economic condition than it is now? And if so, should Italy exit the euro now?
Would Italy be better off without the euro?
By: Steve Cecchetti and Kim Schoenholtz – Brandeis University, New York University
Cochrane argues that unattainable expectations such as productivity convergence among EZ members upon adoption of the common currency are fueling the arguments of eurosceptics. Would Italy be better off with the lira? “A government not sober enough to borrow wisely when offered low rates is not sober enough to artfully devalue, inflate, grab capital “just this once” in response to shocks.”
Douthat and Feldstein on Euro
By: John Cochrane – University of Chicago
