Minister says Italy should study leaving euro-paper

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Minister says Italy should study leaving euro-paper
Fri Jun 3, 2005 1:01 PM BST
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ROME (Reuters) - An Italian minister was quoted on Friday as suggesting the country should consider adopting its own currency again, adding fuel to recent talk of a possible break-up of the euro zone which EU leaders dismiss as "absurd".

Welfare Minister Roberto Maroni told the Repubblica daily Italy should hold a referendum on whether to revert to the lira currency it abandoned when 12 nations started to use euro notes and coins in 2002.

Maroni is a front-line government minister but his views are not believed to be shared by those with far greater sway over economic policy, such as Prime Minister Silvio Berlusconi or Economy Minister Domenico Siniscalco.

Maroni, a member of the euro-sceptical Northern League party, said the euro "has proved inadequate in the face of the economic slowdown, the loss of competitiveness and the job crisis".

He also said European Central Bank President Jean-Claude Trichet was one of those chiefly responsible for the "disaster of the euro."

In this situation, the answer is to give the government greater power to defend national industry from foreign competition and "to give control over the exchange rate back to the government", he argued.

The euro initially tumbled to $1.2220 from $1.2285 in a matter of minutes as the report added to concerns about the European Union's outlook -- politically and economically.

By 0717 GMT, the euro had recovered to around $1.2273, little changed from late U.S. levels.

Neither the economy ministry nor the prime minister's office were immediately available for comment on Maroni's remarks.

Maroni cited Britain as a virtuous example of a country whose economy "grows and develops, maintaining control over its currency".

When it was put to Maroni that Trichet on Thursday dismissed the idea that monetary union could break up, the minister replied: "Sure, he is one of those chiefly responsible for the disaster of the euro."

He added Trichet should try to convince hard-pressed small Italian businessmen that the euro was a success.

Talk of a possible break-up of monetary union has circulated in media articles in recent days -- fuelled by France's referendum rejecting the European Constitution -- but the idea has always been dismissed by policy-makers.

Trichet described talk of the collapse of the euro as "absurd" in his monthly news conference on Thursday, likening the exit of a member state to California ditching the U.S. dollar.

The euro had been rattled the day before by a report in German magazine Stern that the possible failure of the euro was posited at a meeting attended by German Finance Minister Hans Eichel, Bundesbank President Axel Weber and external economists.

Eichel and Weber later stated they had total confidence in the euro, and a participant in the meeting told Reuters the two officials had not been involved in a discussion on euro failure.

Maroni also dismissed the idea that Italy's struggling economy could face an Argentina-style financial disaster if it abandoned the single currency.

"We're already heading towards Argentina, that's why we have to change direction," he said.

Three years ago Argentina defaulted on its public debt.


© Reuters 2005. All Rights Reserved.