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The Continuity of the European Monetary Union is Called into Question by Italy

In: European Union and Monetary Union in Permanent Crisis II

Author

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  • Dirk Meyer

    (Helmut-Schmidt-Universität)

Abstract

With a share of 16.9% of eurozone gross domestic product (GDP) (31.12.2021), Italy is an economic heavyweight. At the same time, Italy holds 23.1% of eurozone government debt. With a debt-to-GDP ratio of 154.8% and a banking sector plagued by a very high level of non-performing loans, the double risk of a sovereign debt crisis and a banking crisis is clearly evident. Two indicators support this statement: first, Italian TARGET deficits have risen from zero (30.06.2011) to 590 billion EUR (31.12.2021). Secondly, the so-called ANFA agreement allows national central banks to purchase securities—for example, their own government bonds. This “money printing” accounted for around 13% (2017) of the Banca d’Italia balance sheet. If one adds the Banca d’Italia’s government bond purchases under the Securities Market Programme (SMP) and the Public Securities Purchase Programme (PSPP), then the bank’s own transactions increase to 46% of the balance sheet. This calls into question the principle of congruence between the emission and money-accepting communities as a stability prerequisite for any currency union.

Suggested Citation

  • Dirk Meyer, 2022. "The Continuity of the European Monetary Union is Called into Question by Italy," Springer Books, in: European Union and Monetary Union in Permanent Crisis II, chapter 0, pages 275-284, Springer.
    • Handle: RePEc:spr:sprchp:978-3-658-38646-7_13
    DOI: 10.1007/978-3-658-38646-7_13
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