The fact that Italy’s economic under-performance is linked to the weakness of its external sector prompts the question of whether Italy should leave EMU to allow its currency to depreciate and regain competitiveness. This Focus presents a number of simulations which demonstrate that this could lead to a substantial deterioration in Italy’s fiscal position, unless Italy is able to maintain the confidence of financial markets and keep long-term interest rates low. Even then, leaving EMU could still cause major disruption to corporate sector balance sheets and the wider financial system.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services