The rise of no-euro and anti-establishment movements in Italy came along with claims that exiting the euro, i.e. Italexit, is doable. In our view, this is a misleading argument. Italexit may only happen as the unwilling and messy result of an unbearable deterioration in public finances and economic performances, combined with misguided political will and financial market turmoil.
Redenomination, and the likely default on debt obligations, would not be a solution to the problem of a high public debt. Contrary to its proponents’ claims, it would not address the issues, while producing significant financial and economic instability.
Much better, and less costly, would be to address Italy’s underlying problems, allowing the country to survive and thrive within the euro by enhancing potential growth and economic resilience. Italexit would be a catastrophic scenario, with incommensurable economic, social, and political costs lasting for many years.

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