There’s still only a slim chance that Italy would ever ditch the euro, but that chance has got greater after the events of the past week.
‘Could Italy become the first country to leave the euro?’ was the opening line of one of my weekly columns in early 2013, as the anti-establishment Five Star Movement first recorded a big share of the vote in an election.
I wasn’t saying that I necessarily thought Italy would, but reflecting on an argument that it was the European country that combined the most to potentially gain from departure and enough clout to force Germany’s hand.
Five years later the fact that we’re back at the same question highlights how the eurozone has been papering over its cracks.
The Five Star Movement and League’s proposed plan for an Italian coalition fell apart after President Sergio Mattarella, left, vetoed their finance minister and now Carlo Cottarelli, right will become Prime Minister before another potential election
Cheap money thrown at the problem by the European Central Bank has eased the symptoms but not tackled the imbalances that are the cause.
Italians are even less convinced the eurozone system is working for them than they were back then.
Italy voted two populist parties, Five Star and the League, into an unlikely alliance of left and right, who when they eventually agreed on a Prime Minister found the whole thing fell apart because the appointment of a eurosceptic finance minister, Paolo Savona, was vetoed by the president Sergio Mattarella.
He said: ‘The uncertainty over our position has alarmed investors and savers both in Italy and abroad.’
The president alluded to a belief that a refusal to budge on an alternative to Savona by the parties indicated that they were trying to sneak in an anti-euro agenda. He added: ‘Membership of the euro is a fundamental choice. If we want to discuss it, then we should do so in a serious fashion.’
In the past, Savona has been critical of Germany and said Italy should have a Plan B for leaving the euro. Yet to many this will seem common sense.
That the Five Star Movement and League’s agreed Prime Minister Giuseppe Conte was replaced by an emergency stopgap of an ex-International Monetary Fund official Carlo Cottarelli, has hardly helped matters.
Italian bond yields rocketed at the start of this week, with the benchmark ten-year bond rising above 3 per cent before falling back to 2.84 per cent yesterday, but the spread between this and ‘safe haven’ ten-year German bonds, which yield 0.37 per cent, still stands near its widest in four years.
The eurozone crisis is back for another blockbuster summer run – and accusations that a euro elite is acting against everyday people become even easier to bandy around.
The irony is that while neither Five Star or the League ran on an anti-euro ticket, a fresh election could now see them try to rally voters against the eurozone.
There is a strong argument that Italy would have done better over the past two decades if it hadn’t joined the eurozone, but the case that it would now be better off jumping ship is much weaker (and there’s not even a clear way that it could).
A calm and objective look at the merits is unlikely, however.
People vote for populism because they think things aren’t going well for them. Italy’s real disposable income per head is below where it was when it joined the eurozone and youth unemployment is 31.5 per cent.
It is up to Italy to solve its problems, but it lacks all the tools it could use to do so thanks to its eurozone membership.
The problems are not insurmountable, Italy has big public sector debt at 132 per cent of GDP but runs a primary surplus (meaning it balances the books before interest payments).
It also currently benefits from cheaper borrowing thanks to eurozone bond buying.
Yet many Italians feel that the eurozone is simply pushing them around.
One of the flashpoints of this came a couple of years ago, when EU bank bail-in rules forced losses onto ordinary savers who owned Italian bank bonds that many had thought were akin to cash savings.
Perhaps Europe would argue that it has been working to help Italy, but that is certainly not the perception that ordinary Italians have. Instead, there is a growing belief that the EU is trying to force Italy to bend to its will and acting more in the interest of the euro than its people.
A line can be drawn between that perceived attitude and the way that rather than appearing to want a mutually beneficial deal for Britain and Europe from Brexit, the EU seems more concerned with the UK being seen to be punished for its choice.
There have been no shortage of warnings that Italy is struggling and that people there are increasingly unhappy.
Europe’s leaders should have spotted the issues and done more to convince Italy that the eurozone was on their side and would change to help its third largest economy get better – and to improve things for everyday Italians.
If they want to hold the euro together they could and should still do that, because more of the same from the eurozone is not the way out of this crisis.