WikiLeaks reveals Italian officials had serious concerns about Italy's ability to participate in the monetary union already since the late 70s
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A 1978 cable from the US Bureau of Economic and Business Affairs to the Secretary of State, was monitoring in detail the Italian serious concerns on the perspective of Italy joining the European monetary union. It describes an atmosphere of anxiety inside the Italian political elite who wanted Italy to join the union because, otherwise, the country could be left behind concerning the European integration.
However, a significant number of Italian economic and political figures (among them top executives of the central bank), had serious concerns about Italy's ability to join a monetary union based on a hard currency like the German Mark.
It seems that the Italians were looking for a special deal that would secure a kind of flexibility for the Italian currency inside the European Currency Unit (ECU) that was about to be established less than a year later. ECU was formed on 13 March 1979 and replaced by the euro currency on 1 January 1999.
In the summary we read:
The relaunching of the process of European monetary union at Bremen has raised both hopes and doubts about Italy's role in such a scheme. While the government has reservations about many aspects of the Bremen proposal, it sees important political and economic benefits deriving from participation in a European currency bloc. In essence, the GOI [Government Of Italy] fears the consequences of being "left behind" by non-participation in a new European monetary scheme and believes that participation would reinforce government efforts to bring about structural changes in the economy. Therefore, the attitude of the GOI has been one of acceptance, tempered by clear indications that it will work to influence the final shape of the agreement - hoping to assure that the system is compatible with Italy's economic structure. The government has received significant political support for its position.
However, a number of people, including the top echelon of the Bank of Italy, looking at the proposal in purely economic terms, have very serious doubts about the feasibility of Italy's participating in a new European monetary system under present domestic economic conditions.
Italians have few illusions about their economy's present capacity to remain in a system which would rigidly tie its exchangeurr rate to a strong currency like the Deutsche Mark. Hence, the GOI will try to negotiate an arrangement which would be both gradual in implementation and flexible enough to allow Italy to participate from the start. This is necessitated by the weakness of the Italian economy relative to those of the other potential participants in the monetary scheme, especially as regards the rates of inflation and economic growth. As Pandolfi indicated to the ambassador, Italy ideally would like to see an arrangement where the parities could be changed at the discretion of individual members.
There is also some dissent on the ground that European monetary union is not in the best economic interests of the country. These dissenters include Luigi Spaventa, a well-known economist and an independent deputy elected on the PCI list in the last election, who is one of few to have publicly criticized Pandolfi's promonetary union stand. We understand that the Bank of Italy, particularly at the top echelon, also has serious reservations but, in accordance with bank practice, has not made them public. The Bank of Italy will undoubtedly be working behind the scenes in coming months, trying to extract the best conditions for Italy in any new monetary arrangement.
Those who dissent argue as follows: pegging the Lira to the European Currency Unit (ECU) means, in effect, tying the Lira to the DM. The Lira would tend to appreciate and Italy would thus lose competitiveness since relative inflation rates are not likely to be equalized the the near term. Accordingly, if Italy is to remain in the system, it must either support an unrealistic exchange rate or run its economy in lower gear. On the other hand, they maintain, keeping the Lira pegged to the Dollar gives Italy the best of both worlds. It gives the country a stable Lira-Dollar rate, which has both economic and psychological significance, while gaining competitiveness against Germany and other strong currency countries.
A few decades later, the fears of the Italian economists and politicians about Italy joining the monetary union have been actually proved quite modest. Italy has been trapped inside the eurozone, exhibiting nearly zero growth for years and facing an enormous debt. Moreover, Italy was one of the first members that was unfortunate enough to experience the undemocratic nature of the eurozone, through which the union dictates austerity and sado-monetarism in favor of Germany's surpluses.