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Italy Will Never Go Through a “Debt Crisis”

ItalyThe finance minister of Italy has reassured citizens that Italy will never have to go through a debt crisis, such as the one Greece is experiencing. He expressed confidence in the European Central Bank’s (ECB) ability to prevent the contagion from spreading.

He told Corriere Della Sera, the biggest daily in Italy:

Let me remind you that we are not in 2011 anymore. Today, the institutions are stronger and so is our economy.

Italians, who are worried about the financial crisis in Greece, welcomed this message. The sight of Greek citizens heading over to banks in large numbers to withdraw their deposits has terrified the people of Italy, an economy that began growing only after six years of economic recession and stagnation.

Italian researcher Antonio Villafranca said:

The situation today is totally different than it was three years ago. We still, of course, have a huge public debt, but it is sustainable.

Considering the fact that the spread between government bonds in Italy and Germany is “relatively low,” borrowing costs in Italy are close to the same in Germany, the toughest of Eurozone economies. This indicator instills confidence in Italy’s ability to repay debts. An increase in the spread is to be expected, but Villafranca says that the Italian government is stable and its industry is quite strong, factors that enable the country to handle any economic shock.

When the government of Italy assures its citizens that the country will not suffer the fate of Greece, it speaks chiefly because of its confidence in Mario Draghi, the president of the ECB. The people of Italy are secure in the feeling that their country is indispensable to the eurozone.

However, the debt crisis in Greece is sure to have an effect on the political condition in Italy. Throughout the negotiations between Greek Prime Minister Alexis Tsipras and the leaders of Europe, Italian Prime Minister Matteo Renzo maintained low profile. But last week, he announced a referendum regarding austerity cuts in emergency assistance for Greece. Renzi tweeted that the referendum should be considered essential for the euro’s future in Greece.

But political opponents of Renzi are increasingly supporting Tsipras and opposing the euro. Renzi is getting less popular as anti-euro sentiments spread in Italy. Senior lawmakers of the M5S say in their blog:

The only route to emancipation from the chains of the euro and of austerity is to say no to what the creditors want to impose.