“A departure from the euro by France or Italy would cause the largest default in History. Foreign holders of Italian or French debt denominated in euros would be paid with the equivalent of the Lira or the Swiss Franc”.
Given the triumph of Brexit and Donald Trump, we should reconsider a new crisis in Europe. If Matteo Renzi loses the constitutional referendum in December, Italy’s permanence in the Eurozone would be in doubt. The first cause of this difficult situation does not lie in the idea of the referendum itself, but in Italy's economic development since it entered the Euro in 1999, as total productivity fell by 5%, while in countries such as France and Germany it rose 10%. The second cause may be that the EU did not propose both fiscal and banking union after the crisis (2010-2012), and instead we entered into an era of austerity. The three leaders of the Italian opposition (Five Star Movement, Forza Italia and Lega Nord) agree to leave the Euro. Therefore the referendum, which takes place on December 5th, could make the departure from the Euro a reality. Renzi stated that he would resign if he lost the referendum. In France, Marine Le Pen has a chance of becoming President. If this referendum ends up eventually with a "Frexit", both the EU and the euro would disappear immediately. A departure now by France or Italy from the Euro would be an absolute catastrophe, since foreign clients and investors would be paid with the Lira and the Swiss franc, respectively. These losses would lead many continental financial institutions to bankruptcy. Could we avoid all this? Yes, but we would need solid decisions made on time: “Merkel would have to accept what she rejected in 2012: a roadmap towards full fiscal and political union. The EU also needs to strengthen the European Stability Mechanism”.