Don’t be afraid of Italexit. It will not happen.


There’s a lot to worry about in the wake of yet another government collapse in Rome – but please, let’s remove Italexit from the list for good.

The concept is familiar to investors: at a time of political tension, Italy could exit the euro and revert to the old lira as a result of bad government decisions, whether by design or by accident. If Italexit were to manifest – or even approach reality – it would trigger an unprecedented crisis for both the single currency and the Italian economy. Except that won’t happen.

The term is generally misunderstood and grossly exaggerated by international commentators who are often unaware of the workings of Italian political and legal systems. Not to mention that the idea itself has almost entirely disappeared from national debate. And the business community hates it. It is clear to everyone that in order to benefit from European advantages, you have to drop the Italexit talk and play ball.

In fact, many of the concerns I often hear when discussing Italy outside of Italian circles do not integrate the reconfiguration the country has experienced over the past two years, both at home and in Brussels. The transition to more moderate positions on Europe – and therefore on Italy’s place within the European Union – began in 2019 under the second government of Giuseppe Conte, the leader of the Five Star movement, who flip-flopped during his tenure.

The new approach was cemented under the government of Mario Draghi – the one that collapsed last week. In his first speech to the Senate in 2021, the former central banker made Europe a pillar of his government action as well as a key to entering his coalition, to which all parties except the Brothers of Italy have joined. At the time, Draghi told lawmakers: “Without Italy there is no Europe, but outside of Europe there is even less Italy.”

Of course, the counter-argument is that Italian politics is volatile. Investors got burned in 2018 and have reason to worry. Before Italy redoubled its efforts in Europe under Draghi, the populist coalition led by the League and the Five Star Movement openly flirted with Eurosceptic arguments. He tried to appoint a well-known critic of the euro as finance minister and even toyed with the idea of ​​issuing Treasury-backed mini-notes as an alternative means of payment, an idea which was quickly rejected by Draghi, then head of the European Central Bank.

Yet who can say – and better yet – guarantee that it won’t happen again? Here I like to highlight three factors.

For starters, the parties themselves. If you look at the polls right now, the next coalition is likely to be a right-wing coalition led by the Brothers of Italy, the League and Silvio Berlusconi’s Forza Italia. All three parties claim they will reinvigorate the economy, but the Italexit stress would certainly frustrate those hopes.

The Italian right likes to present itself as more efficient in economic management, a friend of lower taxes and everything Made in Italy. Now, when it comes to Giorgia Meloni, the leader of the Brethren from Italy, and probably the winner of this whole mess, one thing to remember is that she is a force of opposition. If Draghi says that the euro is irreversible, she is obliged to say the opposite, not so much for ideological reasons, but simply for tactical reasons. And it has served him well so far. I am simply not convinced that it will be as effective when the fiery politics of confrontation give way to the sobriety of government.

As for the League, which created much of the trouble after the 2018 election, whatever the speech, it has moved closer to the institutions and maintains close ties with the industrialists, who do not want to hear about Italexit. In fact, they want the next government to follow the path traced by Draghi, knowing full well that this is the best way to benefit from European money.

When it comes to Forza Italia, euroscepticism has never really been a thing for Berlusconi’s party. The group belongs to the European People’s Party in Brussels, the same affiliation that unites the mainstream centre-right across Europe and also happens to be the political home of current European Commission chief Ursula von der Leyen.

Finally, the Italian political system has a fascinating ability to cut casualties and cut damage if need be. President Sergio Mattarella, a largely symbolic figure on paper, has shown strong political instincts during every crisis, signaling that there are limits once you get to government. Like the time he rejected a coalition government project deemed too Eurosceptic the day after the 2018 election.

Now, I’m not saying all is rosy. It’s not. Draghi’s downfall returns Italy to its old ways: disorderly, unpredictable and unstable. The collapse of the government, in the midst of European war while facing a winter of discontent, proves how self-centered the Italian political class is. Along with political turmoil comes market turmoil, some of which is already manifesting in Italy’s bond market – and investors are right to worry about the implications for the country’s long-term debt management. But they shouldn’t be worried about Italexit’s comeback prospects.

In fact, the challenges facing the next government are so great that their hands are full and tied. And given the level of bickering we’re about to see early in the campaign, they probably couldn’t even agree on a way out, even if they wanted to.

More from Bloomberg Opinion:

• The populist experiment in Italy has failed: Maria Tadeo

• Can Draghi emerge from the political rubble? : Rachel Sanderson

• ECB crisis plan fails to convince bond traders: Marcus Ashworth

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Maria Tadeo is Bloomberg Television’s European correspondent based in Brussels where she covers European politics, economics and NATO.

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