FIGAROVOX. — This Sunday takes place in Italy the referendum on the constitutional reform desired by the President of the Council of Ministers Matteo Renzi. What are the issues?
Jacques Sapir . — The stakes are indeed both local and European. Italy crossing for many years a serious crisis. This crisis does not take the acute form of the Greek crisis; it is more muted but it is no less profound. It is noted that the introduction of the single currency has killed the Italian economy. Seen when looking at the growth and especially growth per capita. Today, Italy is at the level it had reached in 2000. In other words, these last sixteen years have seen no growth. The low growth recorded from 2000 to 2007 was completely destroyed in the following years. The situation is even worse if we look at per capita growth. In per capita GDP, Italy has now returned to the level of 1997. This is the result of a sudden crisis like Greece. Labor productivity, the growth was comparable to that of France and Germany from 1971 to 1999 has stagnated since 2000. The gap has massively open with its immediate neighbors. Taking 1999 as a 100 index, one is in 2015 to 117 in Germany and France, but only 104.5 in Italy. The reason for this is, as in the case of France, the gap that is created between the virtual exchange rate of the Deutsche Mark, which can calculate the evolution of productivity and the inflation in Germany, and the virtual exchange rate of the lira. A study by the International Monetary Fund shows that Mark is virtually undervalued by 15% (at the exchange rate of the euro) when Read is it, overvalued by 10%. This difference of 25% is cause property misfortunes of the Italian economy, as in the case of France, where the gap is 21%.
What are the consequences of this Italian crisis?
This crisis therefore has internal consequences but also European. In Italy, there is now the feeling that this situation can not continue. The various reforms, both those implemented by the government of Mario Monti or those applied by the current prime minister, Matteo Renzi, have hit the population but were unable to revive the economic machine. The rise in bad debts in the balance sheet of Italian banks, which is the main cause of problems they know, comes from there. This crisis is compounded by the fact that the major shareholders of these banks are private persons, not «institutional investors» as is the case in France. An open crisis of the banks, their bankruptcy would destroy hundreds of thousands of Italians. The management of this banking crisis showed Italian political class that has hardly changed since the 1990s the family Matteo Renzi has been directly implicated in several scandals.
This is one of the reasons why Matteo Renzi to submit a constitutional reform project to a referendum. If he sees a project accepted, it will have a free hand to carry out banking reform and it will redraw the political system to its measurement. If he fails, the banking reform will not take place in any case not as he wishes, and he will have no choice but to beg Germany to conduct a massive policy stimulus s’ he wants to save the Italian economy. As there is very little chance to be listened to Berlin, it might not be other choices for Italy exit a crash of the euro. This output would not be made by Renzi himself. It is believed that if successful the «no» in the referendum, his government would fall fairly quickly, and it would open the way for new elections where eurosceptic parties such as the Movement of 5 stars Beppe Grillo, the League (former «League North «) of Salvini or Forza Italia, the party of Berlusconi, could have the majority. We see how the Italian situation could, in the days and weeks ahead, have a significant impact on the situation of the European Union, but primarily in the Euro zone. If we have a successful «No», investors will withdraw from Italy, but also — and the contagion will play very quickly — from France and Spain. The rates rise, despite the action of the European Central Bank. We will experience a new episode of the euro crisis, but in a political situation where the European Union, already weakened by the «Brexit» and by Donald Trump’s election, will probably have the means to react.
How the scenario of a Italexit is it really credible?
Here we must distinguish the output of the euro for a possible exit from the European Union. Italy has a vital need to recover its monetary sovereignty. It is for its economy, as to a lesser extent for the French economy, a matter of life or death. But an exit from the euro, which is now seriously considered in the Italian industrial, and we know that the Italian MEDEF, Confindustria, there is favorable blotter, does not imply an automatic output the EU. The greater pragmatism will rule then. One can always argue that you can not leave the euro without leaving the EU. But in reality this is not true. EU countries have interest in Italy remains, and we will see that the treaties are, in times of crisis, what Bismarck said: scraps of paper.
Nevertheless, it is clear that the output of the euro Italy, if realized, would considerably weaken the European Union. The latter would then have little choice but to reform fundamentally, summoning all member countries to a new founding treaty, or explode.