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Last Updated: Tuesday, 7 June, 2005, 19:06 GMT 20:06 UK
Italy's heavyweights set for euro fight
By Benedetto Cataldi
BBC Monitoring Italy analyst

Italy's Finance Minister, Domenico Siniscalco
Italy's finance minister has been quick to defend the euro
It already seems to be election season in Italy, even though no poll is scheduled until next spring.

A bitter row broke out this week over the single European currency, which many see as a sign of dark political manoeuvring.

It all started when two ministers from the anti-Europe Northern League - a tub-thumping coalition party - called for Italy to return to its old currency, the lira, as a way to solve the country's economic difficulties.

These statements have been met with scorn by European Union officials, and have apparently not found much support in Italy either.

"Italy's currency is the euro," Italy's Finance Minister, Domenico Siniscalco, bluntly insisted on Tuesday.

But such a controversial proposal - just days after French and Dutch voters rejected the EU Constitution - is indicating very clearly the lines along which the next general election will be fought: the state of the Italian economy and who is to blame for it.

Last month, Italy officially entered recession - a far cry from the promises of greater prosperity made by Silvio Berlusconi, the country's billionaire prime minister, when he took office in 2001.

Looking for culprits

So, what is to blame?

A poor performance by the Italian government, as many say, or, as many others suggest, was it rather the introduction of the euro and the considerable rise in prices which followed?

More importantly, who is to blame?

Is it Mr Berlusconi, who ended up presiding over a shrinking economy, or is it rather Italy's left-wing opposition leader, Romano Prodi, who was heavily involved in the introduction of the euro as Italian Prime Minister first and EU Commission President later?

Romano Prodi
I must tell you I am proud of having taken Italy into the euro
Romano Prodi

Mr Prodi is clearly conscious of the political importance of the euro debate.

On Monday, he defended his role and that of the current Italian president, Carlo Azeglio Ciampi, in introducing the single currency.

"I must tell you I am proud of having taken Italy into the euro, along with the then treasury minister Carlo Azeglio Ciampi", Mr Prodi said.

"The euro has given new energy to the country and allowed young people to get a mortgage for their house by lowering interest rates and inflation and putting Italy back in line.

"Then, if all this wealth was later wasted, this is certainly not the euro's fault. There are countries with the euro which are growing rapidly.

"The problem is not the euro, the problem is Italy."

Poisoned chalice

Mr Prodi needs to defend himself stoutly: the issue could make or break his political ambitions.

The euro is not something most Italian politicians are keen to be associated with. Many blame the euro for the weak economy, and insist the currency has hiked prices.

There seems to be a grudging acceptance of the euro and in the most recent EU poll only 50% of Italians said that adopting the currency had helped their economy.

Italian Prime Minister Silvio Berlusconi (l) and cabinet member Gianfranco Fini
Italy's economic performance is proving to be no laughing matter

When asked if the euro had achieved an international status like the US dollar or Japanese yen, Italians were the least positive out of the 12 euro-zone nations.

Of those questioned, 63% said it was on a par with the dollar and yen, compared with an approval rating of 90% in Ireland.

Despite its regular devaluations, the old lira obviously still holds a place in the nation's affections with 47% of those surveyed admitting they still counted in the defunct currency when buying goods in shops.

Mr Berlusconi is lagging behind in opinion polls, and it seems that his main chance of survival is for someone else to be blamed for the state of the economy.

So far, the prime minister has kept out of the debate.

But the Northern League - which made the calls - has often proved to be Mr Berlusconi's closest ally in his often fractious coalition, and Mr Berlusconi has not contradicted his ministers.

The fact that the EU is launching procedures against Italy for not respecting eurozone budget deficit limits can only add fuel to the fire.

After France and the Netherlands rejected the EU Constitution, Italy could soon become the third EU founding member to shake the Union's foundations.

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