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Italy's Northern League ministers break coalition ranks in call for lira's return
By Tony Barber in Rome
Published: June 8 2005 03:00 | Last updated: June 8 2005 03:00

Italy's populist Northern League party pressed on yesterday with its campaign to bring back the lira in spite of condemnations from other eurozone countries and its own partners in the centre-right government.

Roberto Castelli, justice minister, said the league planned to present concrete proposals for restoring Italy's former currency at a party meeting on June 19.

"Does sterling have no economic foundation because it is outside the euro? Is Denmark living in absolute poverty because it is outside the euro? Are Swedes poor because they are the outside the euro?" Mr Castelli asked at a conference in Milan.

All three league ministers in Italy's coalition government have spoken out since last Friday in favour of the lira's return.

In so doing, they have taken a line completely at odds with a fundamental point of government policy, but at no apparent risk to their jobs.

The anger and embarrassment of other politicians at the league's campaign are tempered by the recognition that the party's purpose is to attract maximum attention as Italy prepares for a general election next year.

In particular, the league wants to discredit Romano Prodi, the centre-left opposition leader who, as Italy's premier from 1996 to 1998 and later as European Commission president, was responsible for taking Italy into the eurozone.

In this sense, the league's campaign blends with one element of the election strategy of Silvio Berlusconi, prime minister. He says Mr Prodi's government fixed the lira against the euro at too high an exchange rate, a problem compounded in Mr Berlusconi's view by the euro's subsequent strength against the dollar and by the European Central Bank's monetary policy.

Opinion polls show the Italian electorate still has doubts about the euro's advantages. A Eurobarometer poll in November showed 64 per cent of Italians had either "a lot" or "some" difficulties in handling the euro - the highest level in the 12-nation eurozone.

Consumer groups say the euro's introduction stoked inflation, though official statistics do not support their argument.

Although the league wins only about 5 per cent of the national vote, it provides Mr Berlusconi's coalition with important electoral support in northern Italy. Still, there are risks for the premier in letting the league's anti-euro populism go too far.

Interest rate payments on Italy's huge public debt have fallen significantly since the euro replaced the lira, and the premier is keen to avoid inflaming relations with the European Union at a time when Italy's shaky public finances are the target of disciplinary action from the Commission.

However, Giulio Tremonti - deputy prime minister and a former finance minister from Mr Berlusconi's Forza Italia party - also sees electoral mileage in linking Italy's economic difficulties to Mr Prodi and the euro.

Mr Tremonti said on Monday the euro was "a good thing" but could have been introduced as a unit of "reference value", allowing the lira to remain in circulation.

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