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Could a new financial crisis, brought on by the Covid-19 pandemic, lead to Italy’s exit from the eurozone?
Lucio Baccaro, Björn Bremer
Erik Neimanns
present evidence from a new survey experiment on Italian attitudes toward a European bailout and exit from the euro. They find that a majority of voters would opt to stay in the euro if a bailout did not involve conditionality, but that there would be a majority for leaving if a bailout were contingent on austerity policies.
Covid-19 has increased the risk of a new financial crisis in the eurozone. This time the epicentre would most likely be Italy, where public debt, already very high before the pandemic, nearly reached 160% of GDP in 2020, and growth has stagnated for the past 25 years. If financial markets started to have doubts about the sustainability of Italian debt, they would push the interest rate spread up, and force the Italian government to either ask for a European bailout or exit from the eu
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