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Berlusconi in Varoufakis’s path: He proposes parallel currency

Former Italian Prime Minister Silvio Berlusconi touted the idea of a currency parallel to the Euro. The European Commission shot the proposal down right away. However, the former Prime Minister could be a strong card in the next elections May 2018.

According to Berlusconi’s plan, the parallel currency would be in form of  of something called a ‘mini-BoT’. They would be short-term, interest-free, small-sized government securities, a sort of ‘IOUs’ to be used as internal currency to pay government suppliers, taxes, social security contributions.

Something like former Greek finance minister Yannis Varoufakis had proposed in 2015. A revolutionary idea that cost him his position in the first SYRIZA government.

“What’s interesting is that using the notes like a parallel currency is a realistic path to a smooth exit from the euro.

The European Commission on Wednesday rebuffed the idea of a parallel currency put forward by former Italian prime minister Silvio Berlusconi. It said there was only one legal currency within the euro zone.

“There are no exceptions to this rule,” a Commission spokesman said, replying to a request for a comment on the proposal.

Berlusconi, who leads the center-right Forza Italia party, indicated his support for the introduction of a parallel currency in Italy in a newspaper interview over the weekend.

The proposal highlights concerns about broader anti-euro sentiment in Italy, the euro zone’s third biggest economy, as it heads into elections due by May next year.

“What’s interesting is that using the notes like a parallel currency is a realistic path to a smooth exit from the euro,” writes Forexlive.

Italy has two parties that are critical of the euro and European Union, the 5-Star Movement and Lega Nord. Any combination with Forza Italia could create a parliamentary majority. The three parties together currently have nearly 35% support.

On Tuesday Italian government bond yields jumped to stretch the gap with German peers to a five-week high, with analysts citing the proposal as the cause of the sell-off.

Italy’s economy could soar with a parallel currency

Italy could be on the brink of another major innovation. A parallel currency to run alongside the euro EURUSD, -0.1694%  . It already had the backing of the former Prime Minister Silvio Berlusconi, and the parties supporting it are steadily gaining ground in the polls.

Could it work? The mainstream economic establishment will no doubt heap scorn on the idea. And yet, in reality, a parallel currency could provide an elegant exit from the euro, maintaining some of the advantages of the single currency, while freeing the country from endless recession. If it ever gets off the ground, Italy could quickly become one of the most attractive economies in the world.

It is hard to find any words to describe Italy’s experiment with merging its currency with Germany, France and the rest of the eurozone other than “dismal failure.” Since it adopted the euro, Italy’s average annual growth rate has been zero, according to calculations by the Bruegel Institute. You read that correctly. Absolutely nothing, over almost two decades. (full opinion article on MarketWatch)

PS Whether left-wing like Varoufakis or right-wing like Berlusconi… skepticism that the euro system benefits only a few may find more supporters.

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2 comments

  1. Lest we forget Berlusconi was decapitated back in 2011 when he threatened to take Italy out of the euro. Glad to see that Mr. Hubba Bubba is back!

  2. Of course Mr Berlusconi blames the Euro for Italys stagnation when the only alternative for blame is he himself, the Prime Minister for most of the relevant time who constantly failed to reform the Italian state in a meaningful way. Why are Spain, Portugal growing at incredible rates again (Spain 0.9% last quater) while reducing unemploiyment while “burdened” with the Euro while Italy cannot?