In Italy, an anti-euro backlash is ricocheting up and down the peninsula as the country sinks deeper into a recession. Consumers, businesspeople and some politicians now bemoan a currency they claim has left them poorer and less competitive. Earlier this month, the welfare minister, Roberto Maroni, called for a referendum to bring back the lira. The daily newspaper of his party, the Northern League, has just begun rendering prices in euros and lira in its news columns, even though the lira no longer exists.

The euro-bashing isn't confined to Italy. A poll for Stern magazine this month found that 56% of Germans want the mark back.

The mounting dissatisfaction is another blow to the authority of the EU. The 25-member union was pitched into confusion two weeks ago by the rejection by French and Dutch voters of a proposed new constitution for the union. Underpinning those votes and the grousing over the euro are deep anxieties about slow growth, high unemployment and the future of Europe's generous welfare states.

The anti-euro feeling also underscores just how hard it is to forge a common currency. It took the U.S. nearly a century to create a truly national currency. Before the Civil War, thousands of American banks issued notes that in effect worked like independent currencies, varying widely in value from state to state. Only in the midst of war was the Union finally able to impose a uniform greenback.

The euro has faced different but daunting challenges since the experiment was launched in 1999. The U.S. has one national government that can direct aid to depressed corners of the country; the euro zone has 12, each with its own fiscal policy. Workers in the U.S. can freely move from a slumping area to seek jobs in a prosperous one. Europeans, tied down by different languages, pension plans and legal systems, are far less mobile.

Still, the euro is in many ways a triumph. It is so sound that it has quickly emerged as the world's second-most-widely-held currency by central banks after the dollar. The euro has brought big benefits for companies trading across European borders by eliminating currency swings and foreign-exchange fees. It created huge, unified capital markets akin to the U.S.'s, which have helped many European companies raise capital. Returning to a weaker currency would mean returning to higher interest rates.

Thus no one is expecting Italy or any of the other 11 euro members to bolt any time soon. And many analysts say Italy's problem doesn't lie with the euro, but with Rome, which has failed to slim down the country's vast bureaucracy or break down the barriers to competition in big parts of the economy. "The remedy is not to leave the euro, but to correct the structural issues," says Patrick Artus, an economist at French bank Groupe Caisse d'Epargne.

But the chafing of Italians and Germans at the euro, coupled with the anti-EU feeling exposed by the French and Dutch "no" votes, have raised questions about long-term political support for the currency. All four countries are euro members. "Breakup is back on the radar screen as a theoretically possible option" for the monetary union, says Holger Fahrinkrug, an economist at Swiss bank UBS in Frankfurt.

When the new currency was launched on Jan. 1, 1999, it was greeted with champagne toasts in Rome, Paris and Frankfurt. Economists and politicians predicted the euro would one day rival the dollar as a benchmark currency and, consequently, Europe would one day rival the U.S. as a superpower.

The euro was all things to all nations. Italians thought the euro would let them trade their feckless politicians in Rome for technocrats in Brussels. The French gambled that monetary union would enhance their own power. Newly reunified Germany, haunted by Europe's history of wars, thought giving up the mark was a necessary sacrifice for durable peace and acceptance by its neighbors.

Euro advocates vowed Italy would emerge as a big winner from the new money. Ceding monetary policy to the European Central Bank and joining the euro would usher in stable interest rates, which in turn would help Italy pay down its crushing public debt, the third largest by value after Japan and the U.S., and larger than Italy's entire gross domestic product.

Much of that came true. Interest rates fell and Italy cut in half the interest it pays on its debt. But adopting the euro had two downsides.

First, the euro shot up in value against the dollar -- by nearly 50% since 2000. Three of Italy's biggest exports -- shoes, clothing and furniture -- are facing huge competition from China, which pegs its currency to the dollar. That currency swing priced Italian exports out of the market, and gave an extra advantage to already-cheap Chinese products.

More fundamentally, joining the euro took away Italy's trusty safety valve of devaluation. Large parts of the Italian economy, from trucking to electricity, are clogged by red tape and cartels, which hold down competition. That pushes up costs for Italian businesses, hurting their ability to compete with rivals from Germany or France.

In the past, when the prices of Italian exports got too high, currency markets would adjust, sending the lira lower and spurring demand. That would give Italian exporters a quick shot of adrenaline, but it didn't cure the economy's underlying problems.

Now, the only way Italy can compete is to cut prices. The only way it can cut prices is to cut costs. But the opposite is happening. Inefficiencies in Italy's cartel-pocked economy have caused prices of everything from electricity to zucchini to shoot up faster than elsewhere in the euro zone.

Unions began demanding higher wages to offset lost spending power. Companies had to grant raises that outstripped any gains in worker output. Adjusted for productivity, Italian labor costs have risen 17% since the euro came in, while German labor costs have risen only 1%, according to Barclays Capital. Italian productivity grew just 0.5% a year in the past decade, compared with 1.6% in Germany, and 2.4% in the U.S., according to the Organization for Economic Cooperation and Development.

The result: Italy is falling further behind other countries inside the euro zone. The euro's one-size-fits-all value was supposed to be the glue binding the currency zone into a whole stronger than its parts, but instead has highlighted the discrepancies among the European economies. Sluggish euro members like Italy need low interest rates, while faster-growing ones like Ireland could use higher ones.

The OECD says the 12-nation euro zone is the weakest major component of the global economy, and predicts it will grow only 1.2% this year, compared with 3.6% in the U.S. Italy's economy contracted 0.9% over the most recent two quarters, and the OECD forecasts that it will shrink 0.6% in 2005.

All that is prompting a rethink of the logic underlying the single currency. "It would have been better for Italy to stay out [of the euro] for a few years," says Julian Callow, chief European economist at Barclays Capital in London. "There's no easy solution now."

The risk: The weaker countries in the euro zone will return to heavy deficit spending, undermining the euro's strength. With Italy's public debt already at 106% of its GDP, rampant deficit spending could mean other euro members would have no choice but to bail Rome out.

Italians had worked hard just to get into the euro club, fearing that if they didn't get their act together Europe's third-largest economy would be shunted to the sidelines. The race to qualify, which forced Italy to cut its budget deficit to under 3% of GDP in 1997 from over 11% in 1990, galvanized Italians to act. The government was able to levy new taxes to pretty up Italy's books ahead of the entry into the euro.

When Rome made the cut, by a hair, on May 1, 1998, Italians were elated. But there was little political will left over to tackle the root causes of Italy's inefficiency: a huge and stifling public bureaucracy, and vast swaths of the economy that were still insulated from competition.

"Our mistake was thinking that joining the euro was the solution, the end to our problems," says Vincenzo Visco, a silver-haired politician who served as finance minister and then treasury minister from 1996 to 2001. "Instead, it was only the beginning."

One problem never fixed is the country's creaky infrastructure. Andrea Tomat, president of sport-shoe maker Lotto Sport Italia SpA, is dealing with the consequences. To ship its goods, the company, based in Treviso near Venice, must truck them about 170 miles to the nearest international air hub in Milan. The only highway is usually clogged, meaning the journey often takes six hours. To be sure of catching flights, Lotto's delivery trucks leave during the night -- or arrive a day in advance. "This basically doubles our cost of moving goods," says Mr. Tomat.

Another drag, he says, is Italy's bureaucracy. Lotto is trying to bring two employees from China, where it produces 60% of its goods, to work in Italy, but getting the paperwork approved will take six months. "In a world where in six months you can develop whole new stores over there, we are traveling by bicycle when everyone else has a car," he says.

Other business owners feel like they are in a losing battle. Maurizio Brevini, an engineer in Reggio Emilia, runs a 130-person maker of specialized hydraulic pumps founded by his father. Over the past five years, he has boosted his revenue by 13%, to €18.4 million, or $22.3 million. But his costs have risen even faster in the same period and his profits have fallen more than 10%, he says. Part of the problem: two wage increases for his workers.

"I feel badly for them because they have lost spending power," he says. But the salaries are rising faster than worker productivity. "This is like poking holes in the bucket," he says.

Federica Mongiello, a 31-year-old mother from Rome, was shocked when, traveling in the Austrian Alps last year, she discovered that baby formula cost the equivalent of about $10 for 2.2 pounds, when she was paying $48 in Italy. The reason for the huge difference? In Italy, baby formula can be sold only in pharmacies, where discounting is rare.

"Fa schifo," she says, Italian for "disgusting." Some friends have since joined Internet-based collectives of mothers who import baby milk from Austria and sell it for sub-Italian prices.

After years of trying to adhere to the euro zone's strict fiscal criteria, which require that deficit spending not exceed 3% of GDP, Rome is now letting down its guard. The EU estimates Italy's deficit will hit 3.6% of GDP in 2005 and 4.6% in 2006. France and Germany have already busted through the 3% limit, but Italy, with much higher public debt, presents even more of a risk of destabilizing the currency's soundness.

Brussels has been urging Italy to pass a new round of spending cuts to keep its budget in line. Prime Minister Silvio Berlusconi has rejected the idea. Instead, Mr. Berlusconi has argued that a just-approved law that will, among other measures, make it easier for many of Italy's small companies to merge will improve the country's competitive position.

Despite the chorus for a return to the lira, an Italian exit from the euro zone looks extremely unlikely. For now, such a move would cause interest payments on public debt to skyrocket and might force more onerous taxes on Italian citizens and businesses in order to cover the cost.

Nonetheless, a growing number of Italians profess a new affection for their old currency. After stocking up on cheap baby formula in Austria, Mrs. Mongiello's enthusiasm for the euro has waned. "There's no doubt," she says. "We were richer when we had the lira."

Write to Gabriel Kahn at gabriel.kahn@wsj.com¹ and Marcus Walker at marcus.walker@wsj.com²