Gros: Italy’s Europe Minister Savona “Confirms Germany’s Worst Fears”

A plan to exit the euro supported previously by Paolo Savona, now Italy’s new Europe Minister, “seems to confirm Germany’s worst fears,” according to a recent analysis by EconPol expert and Director of the Center for European Policy Studies (CEPS) Daniel Gros. “But what is particularly astonishing about the ‘plan’ is […] the open intention to stick it to the rest of the world, particularly Italy’s euro partners,” writes Gros in: “How to exit the euro in a nutshell – ‘Il Piano Savona’ (EconPol Opinion No.8). According to Gros, Savona’s “Plan B” not only targets Italy’s exit from the euro, but also a massive devaluation of the new Lira and a haircut of around 50 percent of Italy’s debt. This haircut would not only encompass Italy’s public debt, but also its foreign official debt to the Eurosystem (“Target2 balances”). At the same time, however, wealthy Italians would be allowed to keep their euros abroad tax free, writes Gros citing the: “Practical Guide to Exiting the Euro” (Guida Pratica all’uscita dall’euro).

Gros criticises that fact that Savona described the “Plan B” as a negotiating tool and a deterrent, without mentioning the concessions that he was seeking to extract from Italy’s euro partners. It looks like Savona wanted to implement his plan regardless of whether Italy’s euro partners are prepared to accommodate its wishes or not. The plan, which would have to be kept secret would be implemented by the government, without any need for approval by Italy’s parliament. This reflects a “curious view of democracy,” writes Gros.

Publication
Gros, Daniel, "How to exit the euro in a nutshell – ‘Il Piano Savona’", EconPol Europe Opinion 8, June 2018.