Wednesday, July 13, 2005

Some countries better off leaving eurozone, leading bank says

The world's second biggest bank, HSBC, argues that some countries might "benefit" from ditching the euro and suggests Italy could be the first candidate to leave the single currency. The HSBC report, entitled "European meltdown?" suggests that Germany, the Netherlands and Italy have been damaged by European monetary policy and might consider leaving the eurozone, the Telegraph reported on Tuesday (12 July). The paper pointed out it was necessary for some countries to "think more carefully about the costs and benefits of exiting", because of the high risks of a break-up of the monetary union. While even Germany might consider such an option in order to cut real interest rates and regain control of fiscal policy, HSBC believes it is Italy who could become the prime candidate for leaving. The main benefit for Rome would be to switch its existing national debt, currently standing at 107 percent of the country's GDP, from euros to a weaker ''new lira'' - even if this amounted to a default. The idea to ditch the euro has recently been presented by Italy's Liga Nord party, part of the current government coalition. The party is planning to use the bid as a major subject in its campaign for next year's parliamentary elections.


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