Italy and the Euro in the Global Economic Crisis

As Italian policymakers argue about the best way to respond to the global economic crisis, the importance of the euro to Italian economic stability seems to have dropped out of the debate. This is a problem for three reasons: it dulls the memory of Italian efforts to get into the single currency in the mid-to-late 1990s; it allows critics of the euro to shape perceptions of how eurozone membership affected Italy during the past decade; and it obscures the trade-offs that Italians would face if they were to make different choices in the future – including the choice to leave. As a result, while it has been relatively easy to argue that Italian politicians would have to be crazy to try to take Italy out of the euro, it may become more difficult to make that case with the same level of confidence as time goes on. Italian perceptions of the merits of being in the euro are changing and the real possibilities available to Italian policymakers are changing as a result. Italy will pay a high price for opening up the possibility of leaving the eurozone whether or not Italian policymakers are serious about taking that step.