Nouriel Roubini

One of the leading European economies – Italy – will most likely be forced to quit the eurozone and return to its previous national currency lira in order to tame the severe debt crisis, says the world-famous economist Nouriel Roubini.

If Italy leaves the eurozone, it can lead to a total collapse of the single EU currency block, Roubini, who forecast also the global economic crisis of 2008, told Financial Times.

According to him, chances of such a scenario are growing all the time.

Italy’s sovereign debt hits as high as 121% of GDP. “Given that it is too-big-to-fail but also too-big-to-save, this could lead to a forced restructuring of its public debt,” Roubini says.

However, he does not believe that restructuring of the debt will help to tackle the crisis. “That will cause significant damage and losses to creditors in Italy and abroad – will not restore growth and competitiveness…if you cannot devalue, or grow, or deflate to a real depreciation, the only option left will end up being to give up on the euro and to go back to the lira and other national currencies.”

News portal BNN already reported, the Italian Prime Minister Silvio Berlusconi has announced he is prepared to step down after the Parliament backs the economic reform plan. Both Houses of the Italian Parliament are set to vote on this issue already this month.

The European Union (EU) leaders are calling on Italy to take a series of economic measures that would curb the government debt and stimulate its economy.

On November 8, 2011, the Parliament’s Lower House held a voting on the 2010 state budget execution. According to the outcome, Berlusconi’s coalition lost absolute majority of its members’ support. Afterwards, Berlusconi admitted that the Parliament is paralyzed and, possibly, the only way out of the difficult situation is new elections.

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